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Consumer 



WJLLIAM f HUM 






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Ci)F:OUGHT DEPOSm 



Untaxing 
The Consumer 

(INTERWOVEN PROBLEMS) 

BY 
WILLIAM THUM 



The Grant Press 

Pasadena, California 

1918 



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Copyright, 1918, 
By William Thum. 



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INTRODUCTION. 

Although this book deals largely with 
the untaxing of the consumer, in addition 
to that its first two chapters treat the land 
question in its relation to taxes — espe- 
cially Single Tax — -and likewise in relation 
to prices of commodities. The purpose is 
really to ask questions and not^ as might 
seerrij to offer convictions or facts; also to 
show advocates of various tax systems the 
nature of the numerous thoughts and 
questions that are likely to arise when 
citizens are pondering how to vote on 
Single Tax and other tax laws. Some of 
these questions are old and have been dis- 
cussed many times, while others are new 
and have as yet received little attention, 
though they bear on the old and make it 
necessary to seek new answers. The re- 
maining chapters show how we can elimi- 
nate the always troublesome tax problem 
from the last great natural resource still 
remaining in possession of the public. 

Since the book is in a measure equiva- 
lent to an assortment of questions, the 
relation between paragraphs sometimes 
appears slight, the less material connect- 



ii INTRODUCTION 

ing links having been discarded to shorten 
the text. However, the drift is toward a 
definite plan. 

Lack of time, because of the near elec- 
tion-date (November, 1918) will prevent 
this work from having any appreciable 
effect on the pending Single Tax campaign 
in California. But, if any suggestions of 
value have been made, I hope they may 
enter into the thoughts of some leading 
workers for or against the Single Tax or 
other tax campaigns elsewhere and be 
used according to the good they may do. 

The tax question, coupled v/ith insep- 
arable economic questions, creates a prob- 
lem so deep and complicated that the 
best amateurs soon become lost in a quest 
for its solution. To solve the problem by 
nation-wide experimentation formulated 
by men of insufficient experience would 
take hundreds, if not thousands, of years, 
and would do avoidable harm in the mean- 
time to the American public. Some way 
ought to be found to appoint a commis- 
sion of life-time experts on taxation and 
economics, composed of people who pos- 
sess the broadest possible social training 
and experience and who can be influenced 
by nothing except facts as they see them 
after due study. They should be men 



INTRODUCTION iii 

who measure up to the reputation of Pro- 
fessors Richard T. Ely and Thomas S. 
Adams of Wisconsin, Professor R. A. 
Sehgman of Columbia and Professor O. 
M. W. Sprague of Harvard. Their task 
should be to formulate in detail a tax plan 
and work out a revision of such part of the 
social system as may be imperative in 
making fair taxation possible, and what 
is of equal importance, the commission 
should devise a thorough scheme for fully 
informing the public regarding this plan 
and for putting it into practice. 

Why do Congress and our State law- 
makers leave this vital problem to be 
bungled over by self-appointed amateurs 
like the writer of the present book, and 
others.^ A development of the answer to 
this question would reveal the reason why 
it is so frequent that progressive economic 
and social moves are inaugurated only 
after amateurish self-appointed econom- 
ists and sociologists become a serious men- 
ace to progress itself. 

The Author. 

Pasadena, California, October, 1918. 



CONTENTS. 

PAGE 

Introduction . . . vii 

The Land-Tax Payer. Who is He ? 1 

The Other Side of Single Tax and Prob- 
lems Connected with It 12 
Other Kinds of Taxes 
Business Regulation 
Price Fixing 
Distribution of Supplies 
The Human Element 
Public Ownership 
State Land Settlement Scheme 
Better Farming 
Free Farms 
Free **Land" 

Free Water ... 74 

4 

Successful PubUc Ownership . 77 

Hydro-Electric Power 

Social Meaning of Water Power 

Connection of Universities with the Water 

Power Problem ... 88 

A New Relationship 



UNTAXING 
THE CONSUMER 

(INTERWOVEN PROBLEMS) 



UNTAXING THE CONSUMER. 



THE LAND TAX PAYER, WHO IS HE?* 

Public funds can be raised by levying taxes on : 
articles of consumption generally; the right to do 
business; net private incomes; all kinds of prop- 
erty, including land; land exclusively; and also by 
taxation in many other ways. And, aside from 
ordinary methods of taxation, funds can be raised 
through profits earned by public-owned utilities 
and other public activities. 

Since the largest share of public funds is ob- 
tained through taxing real estate, land-tax comes 
to mind first in any general study of the tax ques- 
tion, and about the first point that presents itself 
is the seeming similarity and relationship between 
tax on land and that levied directly on articles of 
consumption, both of which kinds of taxation are 
borne by the consumer. 

What the Single Taxer Means by "Land" 

When the advocate of Single Tax speaks of 
**land", he has in mind agricultural land; industrial 
and commercial sites; oil, coal, iron and other 
mineral deposits; forests; water-power sites, in 
fact, everything useful to humans in its natural 
and undeveloped state, except air, sunshine, and 

Foot Note: — Thii chapter, though herein somewhat revised, was 
ori^ally written as an article for the *'Out-West Magazine," and appeared 
in Its number for October 1916, under the caption of 'Tai Problems." 

1 



2 UNTAXING THE CONSUMER 

rain, even though they are themselves equivalent 
to "land" in cases where they cause a special and 
unusual advance in the value of land. In the 
present article the word **land" will be employed 
in this sense. 

Used Land Would Soon Yield All the Taxes. 

The Single Tax system provides that all funds 
used for public purposes shall be raised by taxing 
land alone, all other methods of raising public 
moneys being abandoned. This would, of course, 
necessitate much higher taxes on land and would 
doubtless result in so much of it being put to use 
as could under the new conditions created by this 
kind of taxation be profitably employed both by 
the private individual and the general public. Not 
all land can be put to use, for the reason that more 
of life's requirements would be produced than 
could be consumed by our present population, and 
land for which there is no early use in prospect — 
or surplus land — would, therefore, have to be 
abandoned by present owners as soon as the tax 
burden became too heavy for them. In conse- 
quence, it would revert to the state and, until 
again sold, would, of course, yield no taxes. The 
land used by private individuals would have to 
meet all taxes required to pay expenses of govern- 
ment. It is true that no inconsiderable portion of 
the unused and some of the partially used land, 
especially in the country, is taxed very lightly at 
present and, if this tax should be eliminated 
through reversion of such property to the public, 
the effect on the tax rate of the used land might 
be negligible; but much of the unused land in 
cities is today taxed heavily. 



UNTAXING THE CONSUMER 3 

Land Tax Borne by Consumer. 

Speaking in general terms: whatever the tax 
levied on any kind of land, it is passed along to 
the consumer of products derived from that land, 
whether the products be tangible or intangible. 
The tax on farms is paid by consumers of farm 
products. Take the wheat farm, for instance — 
the consumers of wheat and things made of it, like 
flour and bread, pay the tax on these farms. This 
becomes clear when we stop to realize that the 
wheat grower must pay the taxes on his land with 
the money received for his wheat, and he must 
get enough for his wheat to pay his taxes, farm 
expenses and living costs and, in the average year, 
a surplus covering not less than the minimum for 
which he will engage in the growing of wheat. 

However, sometimes he is willing to pay the 
taxes out of his minimum surplus, because of a 
chance of getting back the amount so paid, with 
good increase, out of speculative gains from the 
sale of his property. 

Excepting where expressly stated land taxes 
are herein discussed irrespective of rent and re- 
gardless of the influence of taxes on rent; the pur- 
pose being to learn who pays them. Should agri- 
cultural land suddenly be relieved to a material 
extent from its present taxation, the wheat grower 
would at first reap just that much more profit; but 
such a condition undoubtedly would attract more 
men to growing wheat, until in the course of time 
the price, on account of increased supply, would 
change until only a normal profit would again pre- 
vail. That is to say, the average profit on wheat 
the country over would gradually become lower 
following the reduction of taxes, until the annual 



4 UNTAXING THE CONSUMER 

savings to wheat growers due to such reduction 
would be entirely wiped out, and the price paid 
for wheat by the purchaser would no longer in- 
clude the extra amount formerly paid for taxes on 
the land. This condition would not apply to any 
certain locality, nor to any one year; but to wheat 
farms taken as a whole over a cycle of years. 

If, on the other hand, instead of being more 
lightly taxed, agricultural lands were subjected to 
double the present assessment, the growers of 
wheat as a whole might at first suffer a loss in 
profit equal to the total of such extra, or additional, 
taxes paid; but in a short time some growers, 
whose reduced profit would no longer provide a 
minimum surplus for which they would raise 
wheat, would cease growing it, and the absolute 
or relative lessening of supply resulting as a con- 
sequence would cause a gradual change in prices 
so as to again advance the profit until the double 
assessment was fully covered and the original 
minimum of profit re-established. 

In the two preceding paragraphs increase and 
decrease in profits is referred to only. No mention 
is made of increase and decrease in price, but of 
'^change in price," although enlarged profits tend 
to increase price and reduced profits tend to de- 
crease it. The writer has done this, because an- 
other element affecting the price of wheat enters 
into the problem. For instance, if agricultural 
land were made more nearly tax-free, under the 
present system of private ownership, land-mo- 
nopoly would be strengthened. (See foot-note.) 

Foot Note: — If land taxes were to be removed entirely, while all other 
economic conditions were allowed to remain as they have been, land mo- 
nopoly, as revealed in rents, would soon become intolerable. Not many 
^eari ago this was the condition in nations where large holdings, constituting 
in the aggregate a great area of the country, practically escaped taxation. 
Instinct tells us that land ought to be freed from taxation and from price 
as soon as possible, to bona-fide users. A suggestion to this end is the 
main purpose of this book. 



UNTAXING THE CONSUMER 5 

This would result in a rise in the price of all land, 
reducing the number who would otherwise engage 
in the growing of wheat and in all probability re- 
ducing the number of acres planted, thus checking 
production. The price of grain would, therefore, 
have a tendency to rise. An advance in the price 
of land would cause a decrease in the number of 
proprietor farmers and an increase in the number 
of tenant farmers, resulting in higher interest 
charges on the one hand, or higher rents on the 
other, and the total of such charges and rents paid 
by them would, also, have to be covered by the 
average price of wheat. In short, the less the land 
tax the more the rent, and vice-versa. Single 
Taxers intend that taxes shall be equal to the full 
rent value of land; but rent value under this sys- 
tem will cover the present land tax, as well as 
present rent. However, improvements on land 
will not be taxed; but, because unimproved land 
will soon yield no taxes, that which is improved 
shall as a whole have to bear the aggregate amount 
now assessed against improvements, and shall not 
the consumer still be compelled to pay the total 
land tax, whatever its amount may be? 

Now, the tendency to lower the price of wheat 
by reason of the lessening of land taxes and the 
counter tendency to raise the price through 
strengthening land-monopoly neither balance one 
another nor do they have a fixed relation to each 
other. Therefore, the full effect on the price of 
wheat, due to the lightening of land taxes, would 
not be ascertainable without records based on 
wide experience and the most extensive investi- 
gation. 

Suppose that, instead of reducing the tax on 
agricultural land it were doubled, as suggested 



6 UNTAXING THE CONSUMER 

before. In such case the returns for wheat to the 
grower would eventually have to cover this in- 
crease; but, on the other hand, such an advance 
in taxes would weaken land monopoly, lowering 
farm rent and cheapening farm land, thus render- 
ing it more available for use. If his land were 
mortgaged, the wheat farmer would have to pay 
less interest on his land per bushel of wheat pro- 
duced; because the mortgage would amount to 
less per acre. On the other hand, if his farm were 
not mortgaged, the charges on capital invested 
would be less on account of the lower price of 
land. More people naturally could and would try 
to make a living on raising wheat, and production 
would increase relatively faster than population. 
The saving to the farmers in interest and rent and 
the increase in production would then tend to re- 
duce the price. 

Of course, the problem of determining all the 
indirect effects that land taxes have on prices paid 
by the consumer for the products he uses is more 
complex than here outlined, and many other 
questions affecting price enter and will continue 
to enter it until our economic system becomes 
more socialized. It seems quite plain, however, 
that an increase in the tax on wheat land has a 
tendency to raise the price of wheat and that a 
weakening of land monopoly, due to this increase 
in taxes or to any other cause, contributes to lower 
the price. But in this case, as in the preceding 
one, the forces that tend to lower the price and the 
opposed forces which tend to raise it do not offset 
one another, nor do they bear a known relation to 
one another; so their net effect on the price of 
wheat cannot be estimated at the present time. 

In speaking of the rise and fall in the price of 



UNTAXING THE CONSUMER 7 

any commodity at any particular time, we ought 
to consider changes in price in relation to the 
average wages prevailing at that time; but this 
would be going farther than the purpose of the 
present paper demands. 

One aim of this article is to ascertain whether 
the tax on land in general, irrespective of any 
economic effect it may have, is ultimately trans- 
ferred to the consumer through the prices of ma- 
terials derived from land. In other words, what 
we are just now trying to determine is who pays 
the land taxes, not how difficult or how easy it 
may be for him to pay them. Perhaps the follow- 
ing illustration w^U aid better in revealing the 
facts : 

Baker and Grocer Finance the Tax. 

As explained before, the price paid for wheat 
by the miller must cover the taxes paid by the 
owner of the wheat farm. At the time the miller 
sells flour to the grocer and the baker he demands 
a sum that will cover the cost of wheat charged 
him by the farmer, which cost, as just explained, 
includes all taxes on the wheat land; but his price 
also covers the tax he paid on the industrial site 
on which his mill stands. 

The grocer and the baker, therefore, each in- 
directly pays such proportion of the farm taxes in 
question as will correspond with the quantity of 
wheat used to make their flour, and likewise such 
proportion of the taxes on the mill site as the 
quantity of their flour respectively bears to the 
total output of the mill. 

Tax Finally Reaches Consumer. 

When the grocer sells flour and the baker sells 
baked articles at prices including their purchase 



8 UNTAXING THE CONSUMER 

price of flour, they are reimbursed by the buyer — 
the consumer — of flour or of baked goods in an 
amount to cover taxes on wheat farm, mill site, 
and the city lots on which are located the grocery 
and bakery. 

It can thus be asserted that, in the course of its 
travels, the tax on all the land involved reaches 
the individual consumer in some indefinite relation 
to the quantity or value of materials purchased 
by him. 

To illustrate in still another way, let us suppose 
that, through new methods of fertilization, culti- 
vation and harvesting, an average acre of land 
could be made to yield normally one hundred 
bushels of wheat, and that the grain could be de- 
livered to the local elevator at a cost to the farmer 
not exceeding twenty-five cents per bushel. The 
result would be that the price of wheat to the con- 
sumer would in all probability soon drop below 
fifty cents per bushel at the elevator. Suppose, 
on the other hand, that by reason of an uncon- 
trollable, continued and world wide blight, wheat 
and related grain were on an average to cost the 
farmer three dollars a bushel at the elevator; then, 
of course, the average market price of wheat at 
that point would have to be more than three dol- 
lars. If, under such conditions the price were by 
artificial means kept continuously below that 
figure, the grain grower would have to turn his 
efforts to other crops, or he would finally lose his 
property, compelling the country at large either 
to raise grain as a public enterpise or to subsidize 
the grower. 

Direct Tax on Articles of Consumption. 

If a straight ten cent tax were levied on each 
hundred weight of wheat, the tax would be shifted 



1 



UNTAXING THE CONSUMER 9 

onto the consumer in a relatively more direct, con- 
stant and uniform manner. This would constitute 
a direct tax on each article of consumption con- 
taining a wheat product; but in the long run the 
result would be the same as if a corresponding 
amount were added to the regular tax on the wheat 
land. 

Every Land Tax Affects the Consumer. 

The argument used to demonstrate that the 
consumer of wheat bears the taxes on wheat land 
can be applied with equal force to show that the 
consumer of raw fruit bears the taxes on orchard 
land, and the grocer's lot; of canned fruit, the 
taxes on orchard land, cannery site and mercantile 
sites; of cotton goods, those on cotton jBelds, mill 
and warehouse and mercantile sites; and so on, 
with every article of consumption. 

The foregoing carried to a conclusion would 
show that the consumers, as such, pay all the taxes 
on all the land, each in some indeterminable pro- 
portion to the articles of consumption purchased 
by him. 

Under a system that raises funds through tax- 
ing land exclusively, as proposed by advocates of 
Single Tax, the indirect taxes thus paid by the 
consumers in this country, in lieu of all present 
taxes, duties and licenses, would soon amount to 
more than five billion dollars annually — an amount 
so large as to require distribution according to the 
most equitable plan that man could devise. 

Land Tax Inequitable. 

Two Families : — An average family of the class 
having an income of $1,000.00 a year may be able 
to save, say $200.00 annually through economiz- 
ing for the **rainy day"; an average family of the 



10 UNTAXING THE CONSUMER 

class having an income of five thousand dollars 
per year, after spending twenty-five hundred dol- 
lars, can much more readily save two thousand 
five hundred dollars annually for its day of re- 
verses. Using the word consume in its broadest 
sense, the former household with eight hundred 
dollars to spend for current expenses consumes in 
money's worth slightly less than one-third as much 
as the more fortunate family. Since land tax is 
covered by the price of land-products, or articles 
of consumption, it can be said (without trying to 
be too exact) that the land-tax thus indirectly 
paid by the former family would amount to about 
one-third of that paid by the latter who are in a 
position to save easily over twelve times as much. 

Uneven in Application. 

On account of innumerable conditions that af- 
fect prices, there are many instances when the tax 
on land is shifted onto the consumer only in part, 
and in certain cases he is required to bear none at 
all, while in other instances it is loaded onto him 
with heavy increase. 

Seeking Further Knowledge. 

Now, if all taxes were levied exclusively on used 
land, and if, at the same time, unoccupied land 
were to revert to the public and no longer be sub- 
ject to taxation, we should, as the writer under- 
stands it, be under the Single Tax System, and, 
if the arguments herein be correct, the consumer, 
as such, would indirectly pay practically all of the 
taxes collected by the public; so that taxation, at 
least when considered without regard to any 
special modifying, economic effects that any cert- 
tain plan of assessment may have on the social 



UNTAXING THE CONSUMER 11 

organism, might be still more inequitably appor- 
tioned than it is now. 

Before determining upon the best method of 
taxation, however, we shall have to decide whether 
any system of taxation whatever should be used 
primarily for purposes of correcting faulty social 
and economic conditions; whether it should be 
employed with the single view of distributing such 
tax burden as may be provided by law for purely 
governmental purposes as justly and equitably as 
possible, depending altogether on direct methods 
of correcting these faulty conditions, or whether 
it should compromise between correcting such 
social and economic wrongs and levying taxes for 
governmental purposes equitably and justly. Be- 
fore making a decision we should also take into 
account the disturbing effect that any radical 
change in the tax assessment may have on our 
economic life, so that we may plan upon a system 
of taxation in such a way that its introduction will 
not cause temporarily disastrous economic results. 
Furthermore, unless our study reveals the main 
principles on which taxation should be based, our 
conclusion will be of doubtful value. 

At heart we all want the best possible solution 
of the tax problem; but, before we can solve it 
logically and satisfactorily, we must go deeper into 
the question as a whole. 



THE OTHER SIDE OF THE SINGLE TAX 

QUESTION AND PROBLEMS 

CONNECTED WITH IT. 

If the foregoing article is logical, it is clear that 
tax on land is not a fair method of taxation, unless 
it be just that the actual or ultimate consumer pay- 
all the expenses of conducting a nation's affairs in 
proportion to what he consumes and irrespective 
of what or how much he produces or what share 
of the world's goods may fall to his lot. 

Tax System Result of Cupidity. 

Our existing land tax system is the price of 
human cupidity and of business incapacity on the 
part of the public. The blame, if any, for its 
existence is probably on every man, both living 
and dead, in proportion as he is or has been a tax 
hater or has been part of a community incapable 
of meeting weighty economic problems. Had all 
men been scrupulously honest and public-spirited, 
and had each insisted on paying his full share of 
taxes, whatever their nature, in order that no one 
else might perchance pay any part of them for 
him, an equitable system of taxation would have 
been evolved long ago, and I believe it would not 
for so long a time have been a system covering 
land. The desire to be fair would have centered 
human thought on ways and means to discover a 
just form of taxation and to create conditions that 
would make fair taxation possible. Such senti- 
ments seem, however, to be idle dreams, except 
insofar as they point the way toward a higher 
moral state far in the future. 



UNTAXING THE CONSUMER 13 

Causes Contributing to Our Land Tax. 

Our present land problem and system of land 
taxation grew in part out of: 

First: Fear of loss, resulting in extreme caution 
in the selection of permanent investments. Vacant 
land was considered the safest investment that 
could be made, and this was true in a measure, so 
long as land taxes were low. Because of this belief 
vacant land was freely sought for investment pur- 
poses, making some kind of land tax necessary 
until a more just type of ownership should be 
adopted. 

Second: Speculative tendency. Much vacant 
land had a gambling chance of increasing in selling 
value beyond its original price, plus the cost of 
holding. Buying land was like acquiring a ticket 
in a lottery, issuing but one ticket, the price of 
which equaled that of a certain known piece of 
land. The annual taxes and other costs of carry- 
ing the property might be said to have represented 
a sort of fee to keep the ticket (representing the 
land title) valid until the drawing date of the 
lottery, which would correspond to the date of 
the sale of the property. On this date two cards 
would be placed in the lottery, one drawing an 
amount larger than the cost of the ticket plus 
the annual fees referred to, and the other drawing 
a smaller amount. The card calling for the larger 
figure would represent a profitable sale of the 
land and the other card would stand for a losing 
sale. 

Now, this annual tax and other costs of holding 
had to be relatively small or the lottery feature 
of the land purchase would have been so counter- 
acted as to have spoiled the government's lottery 



14 UNTAXING THE CONSUMER 

game for raising public funds, and the public in- 
come would thus have become more difficult to 
collect. This, too, was the cause of much private 
ownership in vacant land and contributed a great 
deal toward our present land and tax problems. 

Third: Tax dodging, arising from the nearly 
universal tendency to resist or avoid in whole or 
in part the payment of legally assessed taxes of 
any kind, no matter how fairly apportioned. Self- 
fish resistance to taxation was one of the prime 
causes for taxing land in this country and for 
granting proprietorship in it. Land had to be 
taxed, because taxes on other property could in 
the past be evaded too easily, and proprietorship 
in land had to be granted in order to levy the taxes 
upon it — especially so if it was not intended for 
regular use. 

Fourth: Official incapacity. Land assessment 
was one of the simpler ways of raising public 
moneys. Real estate was always one of the rela- 
tively easy things to assess, because: a, it could 
not be concealed from the assessor; 6, the specula- , 
tor in vacant land was not as likely as others to 
complain of his taxes if they left him more than 
an even chance to win out; c, taxes paid by the 
speculator lighten taxes on the land of others and 
thus in some degree lessen complaint from the 
non-speculator. 

In the past taxes were largely regarded as a 
graft and office holders handling public moneys 
were almost indiscriminately called grafters. This 
was so partly because some tax payers wanted an 
excuse for dodging taxes and partly because there 
was sometimes truth in the assertion. Although 
many realized that an increase in land taxes would 
have lowered the future purchase price of land 



UNTAXING THE CONSUMER 15 

and saved the user of such land considerable capi- 
tal and interest, it was nevertheless simply second 
nature for people to hate taxes. 

The effects of taxation on the consumer were 
ignored entirely, for the reason that the consumer, 
though most unfairly treated, did not understand 
the problem. Had he understood it, he could not 
have helped himself; for he had but little political 
force. 

Generally speaking, public officials can be de- 
pended upon to adopt the easiest method of doing 
things, especially if all other ways are appreciably 
more difficult. In fact, our government is only 
now learning business details and principles and 
acquiring a capacity to do business of a kind and 
quality that will enable it to levy and collect suc- 
cessfully other than our simple forms of property 
and commodity taxes. 

Fifth: The necessity in the past of giving titles 
in fee simple, in order to warrant the making of 
improvements. Once the land was held under 
sUch titles taxes had to be levied on it or there 
would have been no obstacle whatever to a more 
limited number of men owning it all. The appli- 
cation of other methods of fully securing an owner 
in the continued occupancy of improved land, for 
instance ''adequate use", was heretofore beyond 
the capacity of public business. Yet, had all men 
been honest and well informed regarding tax mat- 
ters, they would probably have been conscien- 
tious in the use and proprietorship of land and 
the will to solve the land question would have 
developed the necessary business capacity to 
do so. 



16 UNTAXING THE CONSUMER 

MONOPOLY. 

Monopoly is closely related to tax and land 
questions :,^r5/, because it usually exacts from the 
consumer what may be called private commodity 
taxes, at the same time shifting its own public 
taxes onto him; second, because, by means of levy- 
ing these ''private taxes", it can both directly and 
indirectly take from uncombined producers every- 
thing that their land yields them beyond a mere 
living, whether the property be taxed or free, un- 
less the monopoly be subjected to strict price 
regulation by public authorities. 

Monopoly in Natural Resources. 

In considering monopoly in natural resources 
let us picture a concrete example. 

A certain iron corporation owns and operates a 
very large iron deposit which, irrespective of im- 
provements, is taxed about $100,000 annually. 
In the past the fact that the corporation owned 
this deposit was largely why it could co-operate 
with similar institutions owning like deposits in 
partially controlling the output of raw iron and 
consequently in fixing an arbitary price on man- 
ufactured iron at figures that yielded an annual 
''excess profit", say, of one million dollars over 
and above a fair profit. Today the human ele- 
ment in great corporations of this sort, and their 
intimate connection with nation-wide financial 
interests, have much morf* to do with making 
monopoly strong. 

Monopoly in Brains and Capital. 

The capacity for organizing and operating great 
business combinations has developed rapidly with- 
in the past generation. Its growth was doubtless 



UNTAXING THE CONSUMER 17 

aided by the opportunity given trusts through our 
laws to monopolize natural resources. Now, how- 
ever, the ability to promote and operate large com- 
binations is no longer vitally dependent upon such 
aid and their business conduct, therefore, should 
itself be subjected to special and direct corrective 
legislation. 

Changing conditions have altered the structure 
or organism of trusts or monopolies. In earlier 
days they formed a close organization embracing 
a relatively limited number of owners. In fact, 
they were really incomplete and embryonic, work- 
ing under a relatively undeveloped * 'system of 
business" that did not lend itself to the operation 
of business combination of such dimensions as we 
see today. They were still engaged occasionally 
in competitive trade wars, depending to a great 
extent upon their powers as relatively large buyers 
to extensively control the raw material markets. 
Later on, when the nature of the materials per- 
mitted, the trusts added extensive ownership in 
the sources of supply to their means of monopoliz- 
ing the raw materials used by them. Now we have 
the super-trust which is mainly an accumulation 
of brain and capital. The available, especially 
trained minds which are not actually needed in the 
conduct of the trusts are nevertheless corralled 
through retainers' fees or given nominal employ- 
ment at good salaries, or they are absorbed by 
other means, so as to monopolize better all the 
mental energy that might otherwise promote ser- 
ious competition or embarrassment to these mo- 
nopolies. This condition was more apparent in 
the past; but it is quite as real as ever, though 
relatively fewer "superfluous brains" have to be 
employed than formerly, as business combinations 



18 UNTAXING THE CONSUMER 

are now more powerful and less vulnerable to com- 
petition. 

Unused capital, that was formerly so restless 
for investment outside of these trusts, is now and 
has for some time been given a freer and more 
liberal opportunity to participate. Such capital, 
begging for investment, made the watering of 
stocks very easy; indeed, much more capital was 
accommodated through watered stock than would 
otherwise have been possible. This has conse- 
quently increased the number of stockholders and 
they, as is natural, individually and collectively 
have helped as they could to uphold the acts of 
their respective trusts, and trusts in general, in 
maintaining increased prices necessary to meet 
unreasonable expenses and to pay dividends on 
inflated stock. AH of this was and in large measure 
still is a natural and inevitable outcome, but it will 
gradually vanish as communities learn scientific 
public control and collective industrial action. 

The Final Control. 

However, the strongest forces creating and 
maintaining great monopolies are the powerful 
financial aggregations which supply the money for 
operating them. To no small extent they divide 
the important branches in the field of industry be- 
tween themselves on a friendly basis, eliminating 
all competition. The interlocking of directors and 
stockholders makes this all the more possible. The 
powers that control the money supply of industry, 
it seems, are in position to dictate just what may 
and may not be done in the larger private business 
activities. Through this financial control the 
greatest industries are to a marked degree co-ordi- 
nated into one superimposed, nation-wide, indus- 
trial organism that can, it seems, escape the effects 



UNTAXING THE CONSUMER 19 

of any tax — at least until the prices of their com- 
modities are efficiently regulated by the Govern- 
ment, which can be done only when our great 
money combination loses all undue influence at 
Washington. Such influence is in part maintained 
through the willingness of a large portion of the 
leading press to serve the combine by creating 
public opinion favorable to it, and through the 
lesser press that follows in its wake through lack 
of courage, knowledge or power to be independent. 
The '*great trust" should not be destroyed, 
however; but studied, regulated and gradual^ 
absorbed, in part at least, by state or nation. 

Raw Material Corporations. 

Under absolute Single Tax, special corpora- 
tions, backed and guided under cover by the great, 
central group of financial interests, would prob- 
ably be organized to supply raw materials to all 
manufacturers alike and would have to pay a large 
part of the land taxes of industry. However, the 
primary purpose of these corporations would be 
to supply with whatever materials they need the 
manufacturing trusts most closely connected with 
the financial interests. The materials here referred 
to would, of course, not be absolutely "raw", but 
would represent the minimum of human labor 
necessary to make them available for transporta- 
tion and for transformation into usable things. If 
the price of these materials were kept down, the 
profits enjoyed by the corporations producing 
them would be light, this making the rental value 
of their land low and, under Single Tax, resulting 
in a land tax correspondingly low. If the prices 
and profits exacted were high, it would follow that 
the land tax would also be high. 

In the absence of government price regulation 



20 UNTAXING THE CONSUMER 

we should probably find that the financial interests 
would provide fairly low prices for the materials 
produced by "raw material corporations", in order 
that the cost of manufacture to the trusts using 
such materials might be kept down and that, with- 
out increasing prices, trust profits might remain 
approximately as before. In other words, any re- 
duction in gains suffered through moderation of 
prices by these "raw material corporations", would 
be overcome through the maintenance of usual 
profits accruing to the trusts. This plan, as is 
evident, would keep down the land tax and would 
not materially affect the total net profits of the 
trusts or the central financial organizations that 
practically govern them, and to a greater or lesser 
lesser extent control indirectly all other industrial 
activity. 

Avoiding High Land Taxes. 

The reason for thus reducing the land tax would 
not be so much to avoid payment of extra taxes 
as to escape the necessity of making such increases 
in the selling prices as might be required to main- 
tain the original rate of profit; for such a rise in 
prices might curtail the demand below the capac- 
ity of the trusts to produce, and in that way pre- 
vent the maximum of gains being made. Although 
manufacturing and financial concerns whose prices 
and services are not legally regulated can usually 
reimburse themselves for increase in any kind of 
taxes by raising prices, they gradually — almost 
instinctively — shape conditions to bring about 
some plan to avoid or reduce any heavy increase 
in land tax on raw materials. 

I can readily see that this move of the trusts to 
reduce the land tax to a minimum could be frus- 



UNTAXING THE CONSUMER 21 

trated by the government authorities arbitrarily 
raising it beyond what the consumer can pay; but 
the consumer would have to meet the burden of 
the advance, up to the limit of what *'the traffic 
will bear'', unless prices were regulated so thor- 
oughly as to require administrative machinery as 
complicated as would be needed for the public 
operation of the trusts themselves. 

Of course, the availability of raw materials to 
all manufacturers alike (which would result from 
the operation of these raw material corporations) 
might foster serious competition if it were not for 
the power of established finance and for the brains 
of "monopoly experts". This is demonstrated by 
the Standard Oil Company. In spite of the fact 
that this company controls only a part of the 
country's petroleum deposits, it succeeds in rather 
arbitrarily fixing its own selling prices and in in- 
ducing or compelling other oil concerns to adhere 
to them strictly. 

The recently exposed business activities of the 
great American meat trust or combination also 
illustrates strongly and completely the monpolistic 
possibilities of combined brain and capital. It is 
only necessary to quote the following from the 
report of the Federal Commission that recently 
(1918) conducted the investigation of the affairs 
of this great combination : 

**The purposes of this combination which for 
more than a generation has defied the law and es- 
caped adequate punishment are sufficiently clear 
from the history of the conspiracy and from the 
numerous documents already presented, namely :- 

"To monopolize and divide among the several 
interests the distribution of the food supply, not 
only of the United States, but of all countries 



22 UNTAXING THE CONSUMER 

which produce a food surplus, and as a result of 
this monopolistic position, 

"To extort excessive profits from the people not 
only of the United States, but of a large part of 
the world. 

"To secure these ends the combination and its 
constituent members employ practically every 
tried method of unfair combination known to this 
commission and invent certain new and efficient 
methods to crush weaker concerns." 

Destructive Competition Versus Trusts. 

It is a question whether the public suffers more 
from arbitrary price-fixing by the trusts today 
than it did from the results of destructive compe- 
tition between them, such as was common before 
they were so fully developed. Destructive com- 
petition was exceedingly wasteful and in the long 
run, of course, the public had to pay prices that 
would cover this waste. Now, however, the public 
should protect itself through government action 
against monopoly prices whenever they are too 
high. 

Great corporations either consolidate and be- 
come one organization, or voluntarily or by agree- 
ment act in friendly unison, which is almost the 
same thing; otherwise they would again engage in 
destructive competition. Therefore, even if a 
heavy land tax on natural resources could be per- 
manently exacted from these large business enter- 
prises and if this did result in starting competition 
between them by the freeing of raw materials, as 
is supposed to be the case, the public would gain 
little and possibly lose economically and, as al- 
ready shown, the land tax itself would in the 
course of time always appear in the prices of com- 
modities used by the consumer. 



UNTAXING THE CONSUMER 23 

Consumer Pays All Expenses and Profits. 

In considering the iron company above cited: 
all profit, that is to say the "excess profit" plus 
the *'fair profit", accrues to the corporation free 
and clear above expenses of operation. These in- 
clude the $100,000 paid as taxes on the iron de- 
posit. In paying for the iron that he uses the con- 
sumer, therefore, has indirectly and in the course 
of time to repay to the iron corporation the 
$100,000 that is annually expended for taxes on 
the ore deposit. He must also furnish to the 
corporation the $1,000,000 constituting '^excess 
profits", as well as normal profit. Of course, be- 
sides furnishing the funds necessary to cover these 
amounts, the consumer, through his purchases of 
iron, must also reimburse the corporation for all 
the other expenses of conducting its business. 
However, if the corporation's price of iron pro- 
ducts were always determined by the limit of 
what the consumer could pay, it would vary little 
whether the tax on the ore deposit were lowered 
to a nominal figure or raised to, say, $500,000. 
In such instances high taxes would reduce the 
corporation's profits correspondingly, although 
the prices paid by the consumer would remain 
as before. 

With efficient regulation this case would be 
different for both the corporation and the con- 
sumer, yet the prices would always have to 
cover the land tax. 

The "Actual Consumer''. 

Who is the consumer of iron? The man that 
occupies his own or a rented dwelling in the con- 
struction of which nails, pipes, screens, furnace; 
locks, hinges and other articles of iron are used. 



24 UNTAXING THE CONSUMER 

the patient whose doctor pays oflGice rent in a 
building constructed partly of structural and other 
iron; the individual who personally uses any 
product that has been transported by rail. The 
amount of freight charged on such an article enters 
into its selling price, the charge itself covering cost 
of maintaining rails, rolling stock and other iron 
of the railway's equipment. In this sense every 
civilized man is a consumer of iron and an indirect 
payer of taxes levied on land containing iron de- 
posits. Just as he is a consumer of iron, so is he 
a consumer of every other elemental product of 
industry. 

For Consumer's Self-protection. 

Where a productive activity is suitable for 
public ownership and operation, the consumer can 
through the acquisition and efficient operation of 
such activity by the public be protected against 
excessive profits arising out of monopoly. In such 
case, however, the public must have developed a 
sufficiently high social character to undertake the 
task and must possess the will to make it succeed. 
The only other way to protect himself, although 
not so thorough, is through complete regulation 
of the industry by the Government,~this includes 
government price regulation. To be truly efifective 
the latter must be so exact and strict as to border 
upon public ownership. 

Public ownership is the ultimate goal in price 
regulation. In fact, it is a step beyond. In com- 
plete government regulation of monopoly, price 
regulation is always an essential thing. In these 
times of business consolidation no land or other 
economic reform can be worthily effective without 
the official price-fixing of important commodities. 



UNTAXING THE CONSUMER 25 

Fair Price Regulation Inadequate 
In Emergencies. 

However, when there is a shortage in any par- 
ticular necessity, price regulation based on a 
reasonable profit over cost of production alone, 
will not properly apportion supplies as between 
consumers. At prices so based those consumers 
having a financial reserve will anticipate their 
wants and accumulate supplies of such a necessity 
only to increase shortage for those who have less 
money and who must make their purchases in 
small quantities to meet their needs from day to 
day. 

Supply, Demand and Competition 
Poor Regulators. 

The Single Tax theory relies upon the effects 
of "supply and demand", and also upon the effects 
of competition, to regulate prices. Under such 
conditions the hoarding of any article of consump- 
tion in times when the supply is limited results in 
an extra depletion of the market and the price 
increases, quite irrespective of cost of production; 
because the dealer demands all he can readily 
obtain for it. Indeed, he must ask more than 
ordinarily; for he knows that in replenishing his 
stock he himself will be compelled to meet an 
advance of unforeseen magnitude in the market 
price. This is a perfectly natural economic devel- 
opment and results in decreased consumption and 
increased production; but in such cases, since 
prices are left to rise without any regulation by 
public authority, they go too high. During pe- 
riods of abnormally high prices, overproduction 
gradually takes place. This is usually followed by 
subnormal rates, decreased production and tempo- 



26 UNTAXING THE CONSUMER 

rarily increased consumption until supplies are 
again depleted. These low rates, so far as not 
taken complete advantage of by the middleman, 
arei to the advantage of the consumer. On the 
wh€)le, hoiwever, this unreliable, spontaneous regu- 
kiiionv always' resulting from the unrestricted 
action of supply, demand and competition, is 
wasteful and is neither good for the consumer nor 
the producer. It tends to aggravate every eco- 
nomic problem, including that of land. 

Price Control by Private Corporations 
of Important Manufactured Products. 

The fore/;yoing applies particularly to prices on 
agricultural products, as agriculture is still poorly 
organized in many lines. On the other hand all 
the principal manufacturing industries are well 
organized and strongly combined. Nowadays the 
latter rarely over-supply a market with their goods 
and usually sell at a super-normal price, deter- 
mined solely by themselves, the consumer con- 
stantly paying more than is really necessary. But 
it must be admitted that, if it were not for this 
universal overcharge, the public would never at- 
tempt to regulate or conduct great industries; it 
would, therefore, never learn self-government 
thoroughly and would never get rid of being 
assessed for private profit on things that should 
be done or made collectively by the people as a 
whole. As far as the public allows combinations 
to charge unrestricted prices for their materials 
it would remain possible for the great private in- 
dustries to absorb whatever benefits would come 
to the consumer through a free land policy or other 
means. 



UNTAXING THE CONSUMER 27 

Competition Being Restricted. 

The better an existing industry is organized, the 
stronger is the community of interests between the 
units that compose it. This increases the margin 
of profit required to induce competition to become 
active, and therefore restricts the field of competi- 
tion. This margin is becoming relatively larger 
and is often taken full advantage of by established 
business. The consumer then is compelled to pay 
it, except so far as actual regulation by th^gov;eru- 
ment is inaugurated. r ivrv; 

Price Control, Free Land and '"''^ 

Taxation Go Together . 

As soon as practicable prices of important art- 
icles, during a shortage in supply, should be deter- 
mined and controlled by law, in order to keep 
supplies on the market until production is in- 
creased, and any excessive increase of profit due 
to continued advance in prices should within 
practical Umits accrue to the public, preferably 
through direct commodity taxes. These latter are 
usually paid by the producer in the first instance; 
however, they must be finally borne by consumers. 
In such cases the consumer cannot be protected, 
except through a change in policy. To give him 
protection prices must be kept normal by law and 
a rationing of the articles introduced, as explained 
later. 

In this discussion land is considered practically 
free when in its natural state it is obtainable at a 
low or nominal price, and a maximum, individual, 
tax-free holding of reasonable size is provided for 
by law, only the excess held above the tax-free 
portion by corporate or individual owners being 
subject to taxation. With land made free in this 
manner the tax on the excess portion would not 



28 UNTAXING THE CONSUMER 

appear in the prices paid by the consumer, as the 
larger part of the production would come from 
tax-free land and this would determine prices on 
a tax-free basis. Thus natural economic processes 
would, even without government regulation of 
prices, place permanently on the owner nearly all 
of the burden of the tax on excess holdings. 

It seems quite certain that free land and wise 
government control of prices are necessary, in 
order that any system of taxation whatever may 
be made approximately just to the individual 
consumer. 

Suppositions. 

If farm land were free in this way, production 
in general would doubtless be somewhat greater. 
If farmers would co-operate to do their own selling, 
dispensing with any unnecessary service of middle- 
men, and also eliminating waste in other ways; if 
they would then always curb the tendency of pro- 
ducers, once organized, to combine in raising 
prices above what is fair; if they would never yield 
to the temptation to reduce production below 
normal or withhold supplies from market for the 
purpose of increasing prices above what is right; 
if they themselves would advance the business 
and profession of farming, and if they would make 
an honest effort to meet any unusual demands for 
their products — ^free agricultural land would, for 
present purposes, doubtless prove a satisfactory 
solution of the land question so far as agriculture 
is concerned. 

Since citizenship has not yet reached this stage 
of development, these things serve to impress one 
with the importance of new land laws and govern- 
ment aid and regulation. 



UNTAXING THE CONSUMER 29 

Another Method of Apportionment. 

The remaining method of apportioning articles 
of consumption among consumers in times of in- 
sufficiency of suppHes is to maintain prices by law 
on a basis of cost and fair profit, and to prescribe 
and enforce by law the maximum quantity each 
consumer is entitled to purchase in a given period 
— in other words, to ration ourselves. This meth- 
od of regulating distribution is the most thorough 
and equitable if efficiently managed, and it results 
in no increase in price for the consumer; but, 
under our present social organization, it is too 
difficult to carry out, except possibly in a crude 
way under conditions of utmost stress. However, 
when land is free and fair selling prices for essential 
products are established by aid of law, and rural 
conditions otherwise are made better, times of in- 
sufficiency of supplies will probably be more rare 
than now, because there will be a larger agricul- 
tural population to exert effort on increased pro- 
duction when the need arises. Generally speaking, 
the United States are not yet adequately socialized 
to adopt and carry out these methods fully; but 
we are at present ready to extend government 
price regulation to a few more of the most import- 
ant articles of consumption. With the exception 
of the rates on water, electric current, gas, freight 
and storage, prices in times of peace have been 
determined largely by individuals financially in- 
terested in high profits; but, if it is found that the 
Government's extension of price regulation in war 
times is in harmony with the interests of the ma- 
jority, the plan will probably be continued in a 
measure after the war and be applied as fast as 
our more important needs demand. 



30 UNTAXING THE CONSUMER 

A Serious Result of Inflated Prices. 

The remarks just given so far as they relate to 
the distribution of supplies, are confined mostly 
to periods when stocks are deficient. This was 
done because the solution of the problem of dis- 
tribution is naturally more urgent in times of 
scarcity of supplies, and problems of this nature 
can best be demonstrated through extreme cases 
involving such urgency. 

But there is an equivalent to shortage of sup- 
plies that has a similar effect on distribution. 
When the price of any article is artificially main- 
tained by producers at a figure that yields more 
than a reasonable profit, the net result of it, as 
far as the consumer is concerned, is equivalent to 
shortage of supplies. Such price may be deter- 
mined and maintained by mutual agreement be- 
tween business houses, by monopoly or, in cases 
of small articles, by custom. Although the stock 
may be plentiful, the price thus inflated naturally 
retards consumption, just as though there were a 
shortage in the market. The selling price of any 
article regulates consumption largely. So long 
as they are artificially inflated, although profitable 
to the producer, prices cannot stimulate produc- 
tion for the simple reason that they curtail con- 
sumption below what it would have been had 
prices been left on a reasonable basis. 

If for unusual causes the demand for an article 
selling at an artificially inflated price meets with 
a demand that overtakes the output of the in- 
dustry, one of three things is likely to take place — 
the output capacity is increased to meet the de- 
mand fully, or the price is again artificially ad- 
vanced to keep the demand down to the original 
capacity of production, or the ability to produce 



UNTAXING THE CONSUMER 31 

is increased to a lesser extent and consumption 
is held back sufficiently through a smaller raise 
in the price, so as to keep the demand within the 
ability of the industries to supply the market. 
But in all three cases the result, of course, is an 
equivalent to shortage of supply. 

In brief, an actual shortage causes a natural 
increase in price, while artificially made high 
prices result in an equivalent to deficiency in 
supplies. 

The latter prices are the ones that cause the 
greater damage to the public and therefore they 
need intelligent regulation by the public to an 
even greater extent than those involving a natural 
shortage. 

A Hidden Danger. 

But there is the danger that the financial in- 
terests, through their power to mold public 
thought, will themselves direct the regulation of 
prices under cover to their own financial gain. 
There has always been a fight between the pro- 
gressive and reactionary political and economic 
forces, to enlist the aid of the public in regard to 
legislation. One purpose of the former is to make 
possible a just price regulation of the great in- 
dustries; of the latter, to enhance the profits of 
these industries. Such regulation must be fair 
and scientific or it cannot last. However, before 
it can be applied scientifically and justly to any 
industry the task must be studied and well learned. 

Government Price Control Does Not 
Shield Consumer From Land Taxes. 

As said several times before, even if the Govern- 
ment should fix prices on our principal iron prod- 
ucts and base them on cost of production and fair 



32 UNTAXING THE CONSUMER 

profit, the consumer would indirectly pay the an- 
nual tax of $100,000 on the iron ore deposit above 
mentioned. For the best interests of the public 
the wisest and most effective rate of individual or 
corporate profit must always be a definite rate 
determined by conditions over and above all 
proper expenses, including taxes. The only way 
to get rid of the consumer's covering this tax is for 
the public to relieve the iron deposit from tax- 
ation; provided not only prices are regulated, but 
that the continuity of title to the land containing 
the deposit is also made dependent on keeping the 
deposit at a legally fixed, minimum, beneficial use. 
So long as land titles are not based on an intelli- 
gently determined minimum use, land monopoly 
will exist, and some of its effects are quite certain 
to show themselves in prices paid by the consumer 
even under government regulation of prices. But, 
if this minimum use is enforced through the cruder 
method of land taxation (whether Single Tax or 
as it is at present), the consumer must bear the 
full, though indirect, assessment. In this regard, 
what is said of iron applies to all other industrial 
and business products. 

High Ability Required. 

To carry out a plan of land titles dependent 
upon use of land, if it is to be honestly, accurately 
and efficiently done, will require public servants of 
the highest character and of natural capacity in 
these lines, — men specialized, also, through train- 
ing of a degree and quality that can be given only 
by our higher institutions of learning, and then 
only if these institutions will extend their opera- 
tions into the field of practical experience, once 
they are equipped to do so. 

Since the necessary knowledge covering the 



UNTAXING THE CONSUMER 33 

proper and adequate use of land is as yet available 
to the public in a few fields only, the introduction 
of a sytem of land titles based on use, as herein 
discussed, would have to be undertaken step by 
step. 

No Insurmountable Obstacles. 

Eliminating excessive monopolistic profit by 
the methods suggested and at the same time dis- 
carding the land tax seems on first thought to offer 
insurmountable obstacles; but these difficulties of 
accomplishment are no greater than would appear 
in developing and carrying out a Single Tax system 
alone if the latter were done with an earnest pur- 
pose of making it as nearly equitable as it is pos- 
sible for a tax on land to be. In fact, problems 
much the same in nature would have to be solved 
in both cases; but in the instance of Single Tax 
excessive monopolistic profits would still exist, as 
before, and the consumer could in no way be freed 
from an indirect payment of the land tax. 

Equitably Apportioning Rent. 

Were Single Tax in full operation, the public 
assessor would in effect be called upon to deter- 
mine the annual ground rent that must be paid by 
farmer, merchant, manufacturer, banker and all 
other men whose business occupies ground space. 
This means the full net annual amount in dollars 
that the ground space is worth as a location, or as 
a source of supply of natural resources, to a certain 
class of business. Ground rent under Single Tax 
cannot be based on the real or estimated selling 
price of the land affected; for we are told by the 
supporters of this system there soon will be no 
selling price. 



34 UNTAXING THE CONSUMER 

As Difficult as Price Regulation. 

When a land owner no longer has a chance to 
profit by possible increase in the value of his land 
(or, in other words, when the element of specula- 
tion is removed from real estate investments), the 
income from improvements, whether the latter be 
erected for lease or for occupancy by the owner, 
must be made more secure and sufficient. Single 
Tax, or land rent assessments, must be so adjusted 
in amount that the owner of improvements will 
have enough of an excess in his rents to leave an 
attractive income after covering vacancies, un- 
insured risks, depreciation, obsolescence, insurance 
and other expenses. Obsolescence is somewhat 
difficult to cover; for at the time when completed 
an improvement may be of a grade of one hun- 
dred percent for the particular place in which it 
is located and through unusually rapid growth of 
the city or through the shifting of a particular in- 
dustrial or business center it may become ninety 
percent obsolete almost immediately. If land 
speculation is eliminated these and other contin- 
gencies will have to be provided for by the assessor 
through adjusting the amount of Single Tax assess- 
ments, even when the land owner is himself the 
tenant. If such provision is not made, private 
improvements will necessarily cease to a great 
extent and public construction and ownership of 
improvements for private business will have to 
take its place to the same extent. This, although 
a consequence of the application of unqualified 
Single Tax, is diametrically opposed to the Single 
Tax theory; but, like it, would present many diffi- 
culties under present social conditions. Once 
taxes are heavily increased to effect a more 
rapid material and social development, as is the 



UNTAXING THE CONSUMER 35 

intention of Single Taxers (and this will be 
necessary in any event), and land alone shall 
have to meet the entire assessment, it is prac- 
tically certain that this assessment will be so 
large that great care in apportioning the tax 
will be required to avoid frequent and ruinous in- 
justice. It will demand a method in levying taxes 
that will require about the same knowledge re- 
garding a business as would be necessary to regu- 
late fairly the prices charged by that business. 

The Owner Himself Must 

Guarantee Land Rent. 

Under Single Tax when in full operation the 
prospective tenant and the owner of an improved 
city lot must determine jointly what the rent for 
the improvements shall be, and the assessing 
agencies of the community will have to attempt 
annually to fix the rate of ground rent at a figure 
that will require the tenant either directly or in- 
directly to pay what the location is worth. Any 
mistake made by the assessor in over-estimating 
the amount of rent value of the land would some- 
times be paid by the tenant, sometimes by the 
owner, while ultimately the entire rent would be 
borne by the consumer. Generally the owner 
would collect from his tenant both the rent for 
improvements and the ground rent and would turn 
the latter over to the proper authorities for public 
purposes in the form of taxes. But the owner must 
pay a tax equal to the ground rent, whether or not 
his tenant pays him and whether or not his prop- 
erty is vacant. In other words, he guarantees the 
ground rent to the public and to this extent is 
surety for the rent of his own property. In in- 
stances where the tenant contracted to pay the 



36 UNTAXING THE CONSUMER 

taxes directly to the tax collector the owner never- 
theless would guarantee the payment. However, 
under our present tax system, the land owner is 
likewise obliged to pay the tax on the property he 
leases out, which, in effect, is about the same thing 
as being surety for the payment of the rent of his 
own property to the amount of the assessment. 

Leasing to Highest Bidder. 

The following has been seriously suggested as a 
practical method of determining the amount of 
ground rent for industrial and commercial sites 
and for sites containing supplies of national resour- 
ces; but I fear great social changes will have to 
take place before it can be applied. At a given 
time,bef ore the expiration of any lease on a site of 
this kind — or, if the property be occupied by the 
owner, then at stated intervals — let the public 
authorities solicit bonafide guaranteed bids for 
new leases from any citizen on any such parcel of 
land as he may wish to rent. If any bidder offers 
more for a location than is offered by the occu- 
pant, whether tenant or owner,let the bidder have 
it; otherwise let the original occupant continue on 
the premises under a new lease, or as owner. The 
public authorities would then pay the owner out 
of the rent they receive an amount to cover a 
good net interest on the value of his improve- 
ments, as well as repairs, depreciation, obsoles- 
cence, risk, running expenses and other costs. 
The remainder, if any, would then be taken by 
the public as Single Tax. 

The application of this plan would raise ques- 
tions like the following: the permissible length of 
leases; provision for additional improvements or 
changes during the life of a lease; adjustments for 
unusual obsolescence, vacancies and tenants' de- 



UNTAXING THE CONSUMER 37 

linquencies and failures; excessive influence of 
temporary business booms and depressions on size 
of bids for leases; real or imagined favoritism 
shown by officials toward one bidder or another; 
possible combinations fostered by merchants, man- 
ufacturers or professional men's associations to 
prevent free bidding; proper relations generally 
between the owner of improvements and the pub- 
lic; pecuniary adjustments covering injury to the 
business of occupying-owner through being outbid 
on the lease of his own properties. 

Consolidated Under Single Tax. 

Under the Single Tax system fully applied all 
kinds of taxes now in use will be displaced and 
assessments will be levied on land alone. This 
means that taxes now levied on buildings and other 
improvements, on personal property, on business 
activities, on articles of consumption, on incomes, 
on imports, etc., will all be assessed against land 
(as the word "land" is defined by Single Tax advo- 
cates), in addition to what is already levied upon 
it. It is generally acceded that, as civilization 
advances, collective or governmental activity 
must expand in scope and taxes must increase pro- 
portionately. This increase also will fall onto the 
land. However, the plan of Single Tax provides 
that the so-called natural resources, considered as 
a portion of the land, shall be more heavily assess- 
ed, perhaps so freely as to offset the increase that 
would otherwise be necessary on city and farm 
land. Single Taxers theuKclves believe, however, 
that such an offset would be only partial. But, 
as explained elsewhere, the consumer would 
through prices of commodities have to pay this 
extra tax on natural resources just as he pays any 
other **land" tax. 



38 UNTAXING THE CONSUMER 

Price Fixing Essential to 
Fair, Thorough Taxation. 

Without considering the detailed knowledge 
required for the full application of Single Tax, the 
question of price fixing alone presents a vital 
reason for knowing the business details of the 
important businesses affected. As we have seen, 
regulation of prices cannot be avoided as a con- 
comitant of any complete or thorough system of 
taxation; for otherwise business combinations will 
take from the citizen through advanced prices 
whatever remedial benefits might accrue to him 
from the application of Single, or almost any other 
form of, tax. It must be borne in mind that as a 
normal result of economic law and regardless of 
competition in trade, most leading articles of con- 
sumption in time go into the control of combined 
or dominating industrial, commercial or financial 
interests, excepting, of course, those produced by 
municipally or governmentally owned enterprises 
in which the question of prices narrows down to a 
relatively simple problem. However, I reiterate 
that not only price regulation, but free land, is 
essential to fair taxation. 

Details Unavoidable. 

Because public authorities, in assessing effect- 
tively for Single Tax, must determine the ground 
rent with increasing accuracy, they will eventually 
have to learn fully the normal possibilities of every 
kind of business and business details so far as these 
affect profits, which means pretty nearly all prin- 
cipal details — especially where the source of raw 
materials is involved or where location is the 
valuable feature. 



UNTAXING THE CONSUMER 39 

City Planning a Great Aid. 

Some of the difficulties in the way of applying 
Single Tax could be remedied by intelligent city 
planning, including districting and building re- 
strictions. Besides being an aid in apportioning 
taxes based on rent values, such planning, if in- 
telligently done, always tends to increase the 
health and happiness of a community and other- 
wise to secure the permanence of private invest- 
ments made in real estate improvements, thus en- 
couraging the construction of better buildings. 
Good city planning would tend to greatly simplify 
the problem of obsolescence. But, notwithstand- 
ing this, as I have frequently stated, under the 
Single Tax plan the consumer would still have to 
pay the taxes and, therefore, the expenses of gov- 
ernment. 

A Few of Many Requirements 
In the Land Law. 

To exempt land from taxation altogether and 
otherwise make it as free as physical conditions 
will permit would require that the public itself 
secure a closer approximation to practical owner- 
ship of it all and then regulate its use wisely. 
Private proprietorship would then consist of a 
reasonably qualified ownership in its use trans- 
mittable to heirs and assigns and a full ownership 
in the improvements upon it. 

Laws regulating the occupancy and use of land 
by private individuals or corporations would have 
to be put into effect and would, among other 
things, have to provide for: 

1. Maximum size of tax-free allotments to be 
allowed any single occupant for any stated pur- 
pose under given conditions, and the rates of tax- 



40 UNTAXING THE CONSUMER 

ation, or rent, on any additional or excess land 
desired by the occupant, the extent of these allot- 
ments to be dependent on the need of the occupant 
and the good of society in general. 

2. The minimum use to which an allotment 
may be put without the infliction of penalties or 
without forfeiture of the right to use or occupy the 
land. Naturally these conditions would be made 
as liberal as possible in the beginning. 

3. Qualifications of public officials who esti- 
mate the use made of land by occupants and the 
modus operandi for determining such estimate. 

4. Special courts and juries or commissions to 
which the citizen may appeal for a revision of the 
estimates regarding the use he has made of his 
land. 

5. Land courts or commissions for deciding 
on the question of the public necessity of dispos- 
sessing a tenant and taking his land for public 
uses, or for changing it from one kind of private 
use to another under the same or a different oc- 
cupant. These courts also to pass on the value 
of such improvements as the removed tenant may 
have made, as well as the damages to his business 
suffered by him on account of such removal. 

Regulations of this sort would develop into a 
long and complicated law; but it would be a much 
used law which would gradually become a matter 
of second nature to official and citizen alike. 

The Consumer's Proper Share of Taxes. 

When land is free from taxation the consumer's 
contribution to public taxes may fairly be limited 
to the payment of moderate profits on services or 
commodities furnished by public ownership enter- 
prises. Ultimately, when public ownership is far 
more general and when incomes are largely equal- 



UNTAXING THE CONSUMER 41 

ized through improvement in our social system 
and a general advancement of individual capacity, 
it may be found that the consumer should con- 
tribute towards the expenses of government 
through utility rates in the proportion that public 
enterprises supply him with what he consumes. 
This, to be sure, is equivalent to a tax, but under 
these circumstances it is just; for it takes the place 
of liberal private profits formerly paid by him and 
is merely a case where he makes a very moderate 
payment to the community for what it is doing 
for him individually, he himself, as taxpayer, par- 
ticipating in the profits. However, all remaining 
public funds, so far as there may be need of more, 
should be derived from other sources than an 
individual as consumer. 

When Is Land Free to All? 

No economic system can be really fair, how- 
ever, that does not tend toward making land sub- 
stantially free to all, and practically tax-free to 
every citizen who makes good use of it. When 
land is obtainable at a nominal price or is wholly 
free of cost and practically free from taxation to 
all who use it sufficiently, and when the prices 
of important products are reasonably regulated 
throughout from producer to consumer, then only 
will land be practically free to every citizen regard- 
less of his occupation, be he farmer, mechanic, 
merchant, minister, soldier or sailor. It will be 
free almost in the sense that air and water are free 
wherever progressive social conditions obtain. 

Some Requirements of Fair Taxation. 

In a society which is well balanced and highly 
developed a tax system should be used which 
can be universally applied. Also the taxes must 



42 UNTAXING THE CONSUMER 

be direct, in order that their weight on the indi- 
vidual may be ascertained clearly. All direct and 
universal taxes are not necessarily equitable; but 
without conforming with these two conditions 
they can never be equitably applied. 

Per Capita Tax. 

A per capita tax of, say, $100.00 per year on all 
able-bodied adults would be direct and universal 
in its application, but extremely inequitable. 
However, being direct, the degree of its inequity 
could at least be determined as far as such a 
problem can be solved. 

Commodity Tax Unfair at Present. 

The direct commodity tax is an assessment 
which if applied to articles consumed by all, 
would also be universal in its application; but, 
under present social conditions, although the 
amount paid by any individual could be deter- 
mined, it would be quite beyond human capacity 
to make it even approximately equitable. Only 
when economic and social conditions are so far 
advanced that that which a man consumes is 
definitely related to the taxes -he ought to pay can 
this form of tax be made fair. The time for this, 
however, seems distant. 

Land Tax an Indirect Commodity Tax. 

Although in their direct form land taxes, in- 
cluding Single Tax, are a limited kind of assess- 
ment, they are in the JBnal analysis indirect, gen- 
eral, commodity taxes. Considered in this light 
it is impossible to determine how much of them 
any individual pays. It is very evident that they 
are not and can not be fairly apportioned. 



UNTAXING THE CONSUMER 43 
Some Income Taxes Shiftable, Others Not. 

Corporation Income Tax. — Since taxes 
assessed against business are in a true sense ex- 
penses, business, whether incorporated or not, if 
subject to the so-called ''Corporation Income 
Tax", will in every instance endeavor to recoup 
itself through increase in prices; thus, so far as it 
can, it will shift its income tax onto the consumer, 
as it does the land tax. 

Income taxes on profits of corporations (and, 
under the present law, co-partnerships), if assessed 
on net income according to its size and regardless 
of the capital invested, is fixed at a uniform rate 
and not at a progressively increasing one. If this 
were not done, numerous stockholders or share- 
holders would be very unfairly taxed. For in- 
stance, let us compare two corporations, one hav- 
ing a capital stock of $100,000.00 making an 
annual profit of $10,000.00, or ten percent, the 
other having a capital stock of $1,000,000.00 and 
realizing an annual gain of ten percent, or $100,- 
000.00. Suppose an income tax on corporation 
profits were assessed at a uniform rate — four per- 
cent, for instance. After paying the income tax 
the smaller company would have $9,600.00 left for 
distribution and could declare a dividend of 9.6%; 
the larger company would have $96,000 left for 
distribution and could also declare a dividend of 
9.6%. It is seen, then, that a stockholder owning 
$1,000.00 face value of capital stock in either com- 
pany would receive $96.00 in dividends from a 
ten percent profit. If on the other hand a pro- 
gressive income tax were levied on corporation 
profits, the smaller company's profits might be 
assessed at a progressively increasing series of 



44 UNTAXING THE CONSUMER 

rates, resulting in the aggregate in a ten percent 
tax on the total profits, while the larger income of 
the other company would naturally be assessed at 
a more extended series of rates amounting in the 
aggregate possibly to fifty percent. In such case 
the owner of $1,000.00 of stock in the smaller 
would receive a dividend of $90.00 and the owner . 
of the same amount of stock in the larger, a divi- 
dend of only $50.00. A corporation income tax 
law of this kind would be unfair on its face and so 
detrimental to the public interest that no possi- 
bility exists of one being enacted. It is quite 
evident, then, that a Corporation Income Tax 
based on the size of the net income, irrespective 
of the percentage of profit accruing to the business, 
must be levied at a uniform rate. Such a rate can- 
not fairly be much above the "normal" rate on 
private incomes; otherwise there would be inequity 
between taxes on individual incomes derived from 
the stock or shares of corporations and co-partner- 
ships and on individual incomes derived from 
strictly private effort or enterprise. Now, since 
the "normal" rate on private incomes will in ordi- 
nary times always be relatively low for practical 
reasons, the Corporation Income Tax just referred 
to will be likewise low. Therefore, being both low 
and uniform, it is particularly easy to shift onto 
the consumer. 

Surtax, or Additional Income Tax. — The tax 
on incomes assessed progressively according to 
their size or amount, although not practicable for 
corporations or partnerships, is under the names 
of "Surtax" or "Additional Income Tax" applied 
to individual incomes. This tax is employed in 
every country where any form of individual in- 
come tax is used. 



UNTAXING THE CONSUMER 45 

Excess Profits Tax.— The ''Excess Profits 
Tax" is a variety of income tax which it is con- 
sidered practical to levy on business profits gen- 
erally, whether of corporations, co-partnerships or 
private business. It is assessed at a progressively 
increasing rate against such part of the business 
profit as may be in excess of a legally allowed or 
exempt rate of profit on the invested capital. 

If the tax be moderately levied, it can and will 
be shifted over to the consumer, unless prices are 
wisely and accurately regulated to prevent this. 
If the highest rate is one hundred percent, or in 
some cases even as low as eighty percent, of the 
excess profits, it will defeat itself; because prices 
will voluntarily be lowered so as to avoid earning 
that portion of the excess profits affected by these 
high rates, or extravagant business methods will 
be employed for the purpose of consuming or 
wasting such portion of these profits. 

We might think that the Excess Profit Tax in 
its higher percentages is a suitable device to reg- 
ulate prices; but it would be so imperfect, un- 
certain, crude and extravagant a method as to 
make its continued use for such a purpose unbus- 
inesslike. However, such a tax might, in certain 
cases; be made valuable as an emergency measure 
for partially, roughly and indirectly regulating 
prices until it became feasible to regulate them 
directly and scientifically. (See foot note.) 

But whether or not it is feasible to raise prices 
to meet a tax, whether or not the Government 
regulates prices, — the consumer must still cover 
all taxes paid by business, for otherwise the latter 
would drift toward insolvency. 

Foot Note:— So far as the Excess Profit Tax may be covered by 
prices charged the consumer, it is equivalent to an indirect com- 
modity tax and to the extent to vrhich it is borne by business it 
lessens dividends and is equivalent to an indirect Income Tax on 
the stockholder. 



46 UNTAXING THE CONSUMER 

Individual Income Tax Difficult to Shift. 

It seems clear enough that the tax on business 
is practically all shiftable to the consumer. But 
it is also clear that, if business is relieved of taxa- 
tion, this would not automatically guarantee the 
consumer such prices as are really fair to him. 
Such prices can be established only through intel- 
ligent price regulation by State or Nation. 

Even if we bring about tax-free land and busi- 
ness and price regulation, taxes would still have 
to be levied, and, in order to improve the present 
situation, they would have to come from sources 
of such nature that would not allow the burden to 
be shifted onto the consumer. So far as I can 
ascertain the Income Tax on individual incomes 
is the only one that could not to any great extent 
be made to fall upon the consumer. 

There are relatively few cases in which indi- 
vidual members of a firm or stockholders of a 
corporation are in position to raise prices so as to 
cover even their individual income taxes. As a 
matter of fact, taxes on individual incomes are for 
the most part not shifted, and for this reason the 
Individual Income Tax may be the best to adopt 
ultimately, as it will save business, as well as the 
consumer, from taxation. As already made ap- 
parent, this can be done with the best result only 
when business is regulated in the interest of the 
public and when our plans and devices for levying 
the Income Tax on individuals are better devel- 
oped. 

The tax on individual incomes is or can be made 
practically universal. It is direct and the exact 
amount paid by the individual is known. It is an 
attempt to tax the citizen in a general way accord- 
ing to the good that accrues to him through the 



UNTAXING THE CONSUMER 



47 



organization that gives society its permanence 
and safety. 

All this does not mean that a tax is equitable 
merely because it is an Income Tax, but that the 
Income Tax itself is one that can be made reason- 
ably equitable. Doubtless it will take time and 
experience to perfect the Income Tax, but less than 
would be required for any other form of taxation 
designed for equity yet suggested. 

A Classification of Public Taxes. 

Individual Income 



Public 
Taxes 



Universal \ Revenue^ 



Tax 

(scientifically 
developed) 



Limited ^ 



Revenue, such as: 
Personal property. 
Commodity. 
Tariff for revenue. 
Stamp. 
License. 
Franchise. 
Land (ordinary.) 
Land (Single Tax), etc., etc. 
Some of these can also be classed 
as remedial. 



[Social. 
Remedial \ Compensating. 
[Punitive. 

This classification is not offered for any other 
use than the immediate and limited purpose of 
this discussion. By its means the definition of 
universal revenue tax is made clearer. 



48 UNTAXING THE CONSUMER 

Taxable People. 

Taxable individuals are those that have in- 
comes in excess of the cost of a normal living as 
empirically estimated by the makers of our tax 
laws. 

Universal Taxes. 

Taxes levied with the intention of assessing all 
taxable individuals in some practical, approxi- 
mately fair, ratable degree, are universal, and 
their primary purpose is to obtain revenue. 

Limited Taxes. 

Taxes that do, and from their nature must, 
altogether miss a large number of taxable people 
or which affect some persons relatively far less 
than others, are limited taxes. They often reach 
individuals whose income is less than what is 
fixed as the minimum for a normal living. 

Limited Revenue Taxes. 

The following are common examples: Personal 
property taxes, commodity taxes, tariff for reve- 
nue, and stamp, license, franchise and land taxes. 
The primary purpose of these taxes is to raise 
revenue. 

All direct property taxes may be regarded as 
limited, even when applied in the most scientific 
manner; for many people having liberal incomes 
and who ought to pay a fair share of the costs of 
government, accumulate but little property and 
in consequence pay less in taxes than their just 
proportion. 

Never will the land tax be other than limited. 
As a direct tax against the land owner it must 
always remain so; for not all people are land 
owners. As an indirect tax upon the consumer it 



UNTAXING THE CONSUMER 49 

must also be limited, as the term limited is defined 
above, because its final apportionment among con- 
sumers is haphazard and is levied irrespective of 
equity. 

Limited Remedial Taxes. 

Taxes whose primary object is to mitigate or 
counteract some social fault or some public annoy- 
ance, come under this head. 

Limited Remedial Social Taxes. 

The inheritance tax, for instance, if regarded 
as a protection to society by reason of its checking 
the increasing accumulation of great wealth and 
power under one management, is a Limited 
Remedial Social Tax. 

Limited Remedial Compensating Taxes. 

To give a specific example of this form of assess- 
ment: Some states levy a tax on undersized iron 
tires on vehicles designed for heavy loads. This, 
when assessed for the purpose of compensating or 
repaying a community for extra damage caused as 
a result of cutting the surface of public roads, be- 
comes a Limited Remedial Compensating Tax. 

Limited Remedial Punitive Taxes. 

Again, if the extra expense of maintaining roads, 
due to these narrow iron tires, does not require a 
suflSciently high tax to drive the tires out of use, 
and, if, to compel the use of wider iron tires, the 
public imposes a higher tax, it becomes a Limited 
Remedial Punitive Tax. 

Taxes Not Clearly Defined as to Class. 

The Inheritance Tax is by many regarded as 
merely a limited revenue tax. It produces revenue 



50 UNTAXING THE CONSUMER 

liberally; but it has a greater social purpose, as 
already stated, and in this respect is a Limited 
Remedial Tax. According to the point of view of 
the reader, the tax on intoxicants may be regarded 
either as a revenue or remedial tax, and, under the 
latter classification, may be defined as a social, 
compensating or punitive tax or even as an ad- 
mixture of these. The true classification of any 
tax, however, depends entirely on what in fact is 
its principal purpose or effect. Now, Remedial 
Taxes are limited by their very purpose which can 
be accomplished only by restricting them to those 
individuals or that part of the public meant to be 
affected or influenced by them. 

Universal Revenue Taxes. 

The Individual Income Tax seems practically 
the only one that can be applied universally and 
with any degree of equitableness; though it can, 
of course, be applied very unfairly and thus be- 
come a Limited Revenue Tax. In fact, the In- 
come Tax will probably gradually develop from a 
semi-Limited Revenue Tax into a Universal 
Revenue Tax. 

An Instrument. 

Single Tax has a double primary purpose : firsU 
remedial, to make it impossible to hold vacant 
land and, technically speaking, difficult to hold 
partly vacant land; second, revenue raising, to 
furnish all the funds necessary for government. 

Single Tax is a limited remedial tax which dur- 
ing its introduction is also punitive, being imposed 
on all purchasers of land as a fine or punishment 
for their still owning it and holding it privately 
for sale. Its punitive purpose is to turn back to 
the public (who should always have held it) all 



UNTAXING THE CONSUMER 51 

ownership in the land without remuneration. 
After imposing the penalty on the owner, which 
automatically and instantaneously must follow 
the introduction of unmodified Single Tax, it will 
operate as a limited remedial social tax, to keep 
private individuals from withholding land from 
use or holding it under inadequate use. 

The ultimate purpose of Single Tax is to effect 
general economic equity; but its application, 
especially in its pure form, will end in giving us 
an indirect commodity tax and otherwise burden 
us with the continuance of an economic system 
that has become unfair and far behind the require- 
ments of the times. 

May Be Compelled to Use Single Tax. 

Limited remedial taxes are not equitable in 
nature; yet, until society has reached a more ad- 
vanced stage of political acumen and a higher 
degree of perfection in character, they may in 
some form remain essential to progress. 

If the people remain indifferent to the land 
question. Single Tax may have to be used as a 
temporary instrument, even though crude, waste- 
ful and arbitrary. It may even have to be em- 
ployed ruthlessly before the public can be awak- 
ened to the coming seriousness of our land question 
and to the danger to our social progress of making 
use of superficial symptomatic remedies in the so- 
lution of this question. 

Human Nature Responsible. 

There is a universal desire to get as much as 
possible for one's efforts, even when donating them 
to a good cause. In this latter case we do not 
receive money for our efforts, but endeavor to 



52 UNTAXING THE CONSUMER 

obtain the greatest results possible, in order to 
increase the personal satisfaction in our labor. 

The tendency of business to shift the Income 
Tax, like all others, to the consumer arises from 
the natural desire in the investor and producer to 
obtain as great a net return as possible from his 
investment, or from his labor and thought. 

It is the same even with the isolated frontiers- 
man who has the winter's firewood to cut. He has 
a choice between green pine logs and dry oak logs. 
He also has a saw that will cut the oak with half 
the effort that will be needed to saw the pine, and 
he can get no other. The green pine will give him 
but one-third of the heat that the dry oak will 
produce. In other words, it will cost him six times 
as much labor to produce the required winter's 
fuel if he saws the pine as if he cuts the oak. His 
desire to get the most for his efforts will, therefore, 
lead him to saw his oak logs, provided that in this 
particular instance there is no special value for 
other purposes in the oak over the pine. 

The tendency that leads the frontiersman to 
cut oak in preference to pine logs strongly in- 
fluences the business man to increase the income 
of his business with the least extra effort possible, 
so as to cover as nearly as may be the newly 
created expense arising from Income Taxes. In 
fact, it is just such a simple and natural tendency 
that is directly and fundamentally responsible for 
the development of our whole monopoly-promot- 
ing, financial system, and also for the very great 
measure of private control that this system is 
under. It is partly because of this ever present 
tendency that it is well to tax the income of each 
individual as soon as practicable, assessing busi- 
ness less and less. Let me say again, this should 



UNTAXING THE CONSUMER 53 

be done only as price regulation is developed, how- 
ever, and the payment of individual income taxes 
is made difficult to avoid. 

That Constant Inclination. 

That same ever active, inherent tendency that 
keeps an individual striving for the greatest per- 
sonal gain will in innumerable ways lead him to 
shift as much of his Tax as he can and whatever 
part of it is thus transferred has to be met finally 
by the consumer. Every such desire or force of 
human nature is a psychologic pressure that moves 
onward until, in the course of time, it meets 
counter forces which divert it or hold it in check. 
Such a tendency, while resulting in material gain, 
is a necessary, elemental basis for the development 
of intelligence in animal life. It even has its 
counterpart in plant life. A tree, for instance, 
having on one side poor, moisture-losing soil and 
on the other side rich, moisture-retaining ground, 
will send many more roots into the good soil than 
into the other. Some people might reason that it 
should be expending extra energy to send more 
roots into the poorer soil, so as to make up for its 
greater difficulty in gaining nourishment from that 
side. However, this desire to accomplish results 
with the least eflFort is good. Only when it is used 
to the undeserved hurt or disadvantage of others, 
consciously or unconsciously, does it become bad. 
Society is such a complex problem that this injury 
is for a long time unrecognized; but after it is dis- 
covered a more or less practical remedy is slowly 
evolved in the public mind, and, following this, 
laws and methods are gradually developed to curb 
an individual's efforts to obtain unfair advantage. 



54 UNTAXING THE CONSUMER 

Taxation and Human Development. 

Not everyone realizes that taxation has a pro- 
found bearing upon human development and that 
no two systems exert the same influence. Land 
tax, as we have seen, is shifted onto the consumer. 
The individual Income Tax can be thus shifted to 
a limited extent only. With the earnest effort of 
society to protect itself by preventing undue dam- 
age to some of its members through the individual's 
tendency to get all he can for his efforts, it will 
become more and more diflScult to load the Indi- 
vidual Income Tax or any portion of it onto 
others. 

I believe the proposed plan of taxation, in con- 
junction with the corelated social plans herein 
discussed, is more just and more practicable than 
other ideas thus far suggested and will do more to 
bring us to the next higher level of social progress 
than if Single Tax or any other new land tax were 
interjected. The Income Tax is probably our final 
type. The only constant problem in connection 
with it is the exact form it should take to meet 
changing conditions until such time when a uni- 
form rate on all incomes would be just. 

Cities the Product of Taxation. 

The average vacant city lot has cost its owner 
and his predecessors taxes for years. They have 
been compelled to pay assessments for street grad- 
ing and paving, sidewalks, sewers, storm drains, 
street openings and other public improvements. 
Besides, the lot has been assessed for bonds to 
build schools, engine houses, police headquarters, 
city hall, incinerators, water works, parks and 
other public institutions; it has been taxed for a 
share of the running expenses of these schools, fire, 



UNTx\XING THE CONSUMER 55 

health and pohce departments, street Hghts, 
etc.: it has been assessed for operating or con- 
ducting the legislative or administrative de- 
partments of city, county and state. The sum 
total of these and similar other expenses represents 
the cost of permanent public improvements and 
of reaching by education and experience whatever 
eflBciency has been developed in the operation of 
our various governmental departments. Without 
such eiSSciency as we have today our governments 
would not be able to control cities or larger social 
units. To be sure, some of the taxes paid in behalf 
of the lot have been undoubtedly wasted; but the 
money thus lost was just as necessary for the 
acquisiton of experience as though it had not 
been wasted. 

It is seen, then, that the lot has paid oflF a cer- 
tain portion of the cost of preparing the territory 
within incorporated limits for city life, by reason 
of which people settled in that locality, the result 
being a city. Without the payment of these taxes 
no city could have been possible — the community 
could not have grown beyond the limits of a mere 
village. 

Taxes and assessments, therefore, paid in be- 
half of each individual lot for district, city, county 
and state purposes, are responsible proportionally 
for the existence of the city, county and state in 
which the lot is located. Without the congrega- 
tion of people there could be no large community; 
but, as just stated, they could not have thus gath- 
ered together, unless individual proprietors had 
paid the taxes on their land. 

Vacant Lots and City Planning. 

Without question each vacant lot has been 



56 UNTAXING THE CONSUMER 

somewhat of an expense to the city during all these 
years; but, until city builders in America have 
developed city planning into a science that will 
show how to get along with the practical minimum 
of vacant lots with which to provide for anticipated 
growth, such lots in liberal number, owned pri- 
vately or by the public, will be a necessary and 
costly evil in the United States. If private indi- 
viduals had not owned them in the past, the public 
would have of necessity been the proprietor, and 
the owners of improved lots, of course, would have 
had to pay just so much more in taxes as would 
otherwise have been paid upon this vacant prop- 
erty. 

Many Losses. 

It is practically certain that at prices prevailing 
during the late real estate activity in the United 
States the average vacant city lot was not a paying 
investment, taking it for the entire period, say, 
since 1880 or 1890. This seems true even where 
the property has remained under its original own- 
ership and where the original price is altogether 
ignored and the investment cost is taken at only 
the total which has been expended for taxes and 
assessments. 

The fact is that a large proportion of vacant 
city lots has cost their owners in taxes and assess- 
ments more than they can be sold for in average 
times; yet, for various reasons, this has not result- 
ed in their being improved. In very many cases 
improvement for rental purposes did not promise 
to pay the proprietor a fair income on the invest- 
ment, not counting the cost of the lot at all. 
Under either Single Tax or under Government 
Control of land, as herein advocated, these invest- 



UNTAXING THE CONSUMER 57 

ments in lots could not have occurred and, of 
course, the losses would not have resulted. As it 
was, the lots were poor investments at even nomi- 
nal prices. 

Single Tax Capitalization in Vacant Lots. 

According to the theory of Single Tax the taxes 
and assessments invested in a city lot for public 
improvements and for the purpose of creating 
social and political conditions that make city life 
possible should be regarded as untaxable improve- 
ments, especially if there has been no opportunity 
in the past to construct paying improvements on 
the lot. Under Single Tax these improvements 
should theoretically not be taxed away from the 
owner, as is the intention of Single Taxers, because 
their value is rightfully a part of the private capital 
on which rents in favor of the owner should be 
based. (See appendix page 95.) 

Detailed Investigation. 

In this country strenuous campaigns have been 
carried on for about ten years in favor of various 
modifications of Single Tax. The burden of this 
long continued struggle has been carried largely by 
sincere men and the economic results expected 
from the application of this tax by its advocates 
are certainly desirable. Yet it seems that many 
of these advocates have lacked that self -exacting 
attitude that compels men to doubt their own 
theories until they have been proved by strictly 
applicable, completed experiment, or at least sub- 
stantiated in part by a detailed practical study 
where no such experiment is available. In the 
case of Single Tax this quality of thought would 
have led them to make as best they could an ex- 



58 UNTAXING THE CONSUMER 

perimental assessment over a representative area 
— a county, for instance — including all kinds of 
"land". This study would also have to deal with 
the question of equity involved in such assess- 
ments, especially in cases where unusual effects 
might occur. 

Several years might be required to complete 
such a tentative assessment satisfactorily, and 
very many hard problems might be encountered 
for solution if the work were done with the open, 
honest and far-seeing minds of men that have the 
confidence of the public. This study might devel- 
op differences of opinion calling for patience and 
tolerance, and it might be found by its own sup- 
porters that the Single Tax theory would require 
radical or even revolutionary changes. After such 
a study, greater confidence would be established 
and the cause of free land would be on a far safer 
basis, because there would be fewer unexpected 
problems left for solution. On the other hand, 
many unsolved problems to overcome during an 
introductory application of the tax might com- 
pletely wreck the cause of free land for years to 
come. 

Some Experiments. 

According to an editorial a couple of years ago 
in the 'Tublic" of Chicago, a Single Tax periodi- 
cal, the nearest experiment to unqualified Single 
Tax thus far made was by Germany in Kiao Chou, 
it having been introduced at the founding of that 
city. This experiment was doubtless ended by the 
Japanese when they conquered Kiao Chou, but it 
might have proved of inestimable value as a basis 
to work on. In Kiao Chou, however, the experi- 
menters did not have to contend with the many 



UNTAXING THE CONSUMER 59 

problems or obstacles that would have to be over- 
come in long established communities developed 
under other tax systems, though, as in the cases 
under discussion, the consumer paid the taxes. 

The pending Single Tax initiative law in Cali- 
fornia is radically different from that anywhere in 
operation, except in Australia. However, Niel 
Nielson, Trade Commissioner to America from 
New South Wales, in a letter to the State Tax 
Commission of California, says that 'the people of 
Australia are not single taxers'. What part of the 
Single Tax theory they do not accept is not stated. 

As I understand the case, if the pending Cali- 
fornia law carries at the next election, vacant and 
partly vacant land in this state would have to be 
taxed more in proportion to its average earning 
capacity than in any other community, including 
Australia. In that continent, the exclusive land 
tax was inaugurated twenty-three years ago, — not 
as early in the history of the development of that 
community as in Kiao Chou, but relatively earlier 
than if it were introduced in California now. As 
applied in Australia it was a modified Single Tax 
with very light assessments at first, which were 
later added to by means of a surtax on land and 
again by a federal land tax. However, the com- 
bined assessments, we are told, do not yet equal 
the rental value of the land. 

I am not sufficiently conversant with the quali- 
fying facts regarding the modified Single Tax as 
applied in Australia to understand why '*The 
Public" did not regard it in the same class as that 
inaugurated in Kiao Chou. 

So far as we seem to know (having no available 
data), the land taxes in x\ustralia, except for large 
holdings which are subject to a progressive surtax, 
amount to no greater percent of the rental value 



60 UNTAXING THE CONSUMER 

of land than do our present taxes on land in Cali- 
fornia. Therefore, if the California amendment 
carries, the taxes on land within that state would 
become relatively much higher than in Australia; 
for it is definitely claimed that the amendment 
will increase taxes on agricultural and on city, as 
well as other, "land". If these taxes should be 
approximately doubled in California, most of the 
vacant and nearly vacant land now assessed at an 
average rate for its class, if not ripe for substantial 
improvement, will be a total loss to its owners. 

In view of the foregoing considerations the fact 
that a similar plan is in force in Australia, where 
it was introduced in the earlier days of its social 
and political development, does not in itself prove 
that the proposed California initiative law is 
equitable or even temporarily feasible. Compli- 
cations and troubles will begin in Australia or any- 
where else when taxes on land become approxi- 
mately equal to its rental value. Then, at last, it 
will be apparent that land must be made truly 
"free", in order to prevent this problem from be- 
coming too complicated and to get the greatest 
social good out of "land". It will then also grow 
more apparent that free land is necessary to pro- 
tect the consumer's interests. 

A Forecast. 

From what has been said it is safe to forecast 
that the social system must in time not only in- 
clude free land, but there must be a large measure 
of oflBcial price-fixing, and of public ownership. 
The individual income tax further perfected, or 
some closely equivalent tax, must be employed 
while the inheritance tax will still linger on as a 
remedial social tax. 



UNTAXING THE CONSUMER 61 

Fair and Simple Tax Plan Yet Unknown. 

Under present complicated, economic condi- 
tions there is little likelihood of developing an 
equitable tax plan that is simple, especially if we 
consider as a part of the system all that must un- 
avoidably go with it. As already explained Single 
Tax itself, if employed, would gradually become 
the most complicated of all if equity were striven 
for. 

Taxation a Great Social Trial. 

It would seem that the simplest and most fund- 
amental way to permit of a simple taxing method 
would be to make our economic system equitable. 
Now, how shall we do this.^^ Not quickly, of 
course. The imperfections of human character 
among rich and poor alike are as much the cause 
as the result of economic injustice. Life's hard 
trials, which are all caused by human failings, are 
themselves the correctors of imperfections in 
character, and experience has taught the world 
that progress in this line is slow. Taxation re- 
garded in its broadest aspect is one of our great 
trials and the advancement of this problem is one 
of the important features of our social plan now 
urgently needing attention. When we have adopt- 
ed a well advanced plan of taxation, we may feel 
certain that individual and public character has 
improved and that we are on the way to make the 
remainder of our social system more equitable. 

Agricultural Land. 

K all agricultural land were subject to exactly 
the same pest, disease, climatic and irrigation con- 
ditions, and if it were uniform in quality and 
availability, and if all crops with the application of 



62 UNTAXING THE CONSUMER 

the same degree of intelligence and industry yield- 
ed the same profit per acre, the apportionment of a 
tax-free minimum of land and the levying of an 
equitable land tax on excess holdings would be 
relatively simple. But all of these things are ex- 
tremely variable, making the application of such 
a tax plan, as already stated, difficult, pending the 
acquisition of experience in applying it practically. 
The same thing might be said of equitably apply- 
ing Single Tax or any other land tax. 

Equalizing Economic Opportunity 
In Agriculture. 

Certain things can be done toward equalizing 
and making more readily comparable the useful- 
ness, or value, of different parcels of agricultural 
land, at the same time increasing their productive- 
ness and availability. In urban communities City 
Planning can be utilized to improve and equalize 
the usefulness, or value, of business, industrial or 
residence sites; but rural land values cannot be so 
readily benefited by methods of this kind. 

For reasons of necessity and practicability 
farming lands will probably be the first to be acted 
upon. Indeed, a good start has already been made 
and, as soon as the social mind turns its special 
attention to promoting the land and tax problems 
for the general good, steps will be systematically 
taken to equalize the worth of land according to 
its classification, so as not merely to realize im- 
mediate and specific results, but largely to equalize 
economic opportunity and to better standardize 
or socialize whatever agricultural production is 
essential to life. 

In a society as complex as it is today it is an 
impossibility for any individual to do this for him- 
self, and there is no other way to reach economic 



UNTAXING THE CONSUMER 63 

equity in any field than by collective action which 
means ultimately governmental action. In dif- 
ferent parts of the country there are already 
started or in contemplation plans to effect im- 
provement in the productive or economic value 
of farms, incidentally making them more uniform 
in value. Some of these steps are: — 

1. Government distribution of practical and 
scientific agricultural knowledge. 

2. Government distribution of business knowl- 
edge applicable to farming. 

3. Co-operation in the ownership and use of 
such things as public irrigating systems, jointly 
operated harvesting machines, etc. 

4. Co-operation in marketing through state 
departments or mutual marketing associations. 

5. Co-operative storage— grain elevators, cold 
storage, etc. 

6. Co-operation in the buying and manufac- 
turing of fertilizers. 

7. Farm Loan Banks, or ''rural credits". 

8. State Land Settlement systems. 

9. Transportation of farm products by Parcels 
Post, motor truck lines owned co-operatively or 
by the public and, later, by government-owned 
railroads. Government freight rates at that time 
will probably be partially equalized, in order that 
the cost of shipping to market may be as nearly 
uniform as practicable for all farmers in the same 
marketing district. 

10. Extension of good roads. Such roads re- 
duce the mileage cost of hauling and consequently 
tend to equalize the cost of transportation by 
private means, making the value of land more 
nearly uniform. 

11. Rapid increase in number of secondary 



64 UNTAXING THE CONSUMER 

schools in rural districts, offering good agricultural 
courses. 

12. A system of reporting local, as well as 
general, prospective crop and market conditions. 
This will doubtless soon be inaugurated, in order 
that over-production and under-production may 
be moderated and prices steadied. 

13. Great extension and improvement of the 
present "farm advisor" system, operated in con- 
nection with universities. Through this the farm- 
er is advanced in professional and business knowl- 
edge relating to agriculture. The purpose in part 
is to inform and aid him regarding: a, the agri- 
cultural value of land he purchases from the State 
Settlement Board, and the uses to which it can be 
put most profitably; 6, what the crop requirements 
are likely to be for the following season. In this 
connection the farmer will also be given such in- 
formation as will enable him to draw his own con- 
clusions in regard to crop conditions; c, the latest 
discoveries concerning the care of the crops a 
farmer has planted; d, the latest ways of keeping 
records covering the results of his work, in order 
that the farmer may determine the value of his 
efforts and strive for better farming methods; e, 
the introduction of collective production to its 
practical limit;/, co-operative marketing associa- 
tions. 

Through Farm Advisors much will be done to 
increase the elBSciency of agriculturists, to advance 
farming as a profession, to stabilize and otherwise 
improve farming as a business, — all of which will 
tend toward equalizing economic opportunity in 
farming and the intrinsic worth of land for agri- 
cultural purposes, and will also tend toward sim- 
plifying the land problems and the land-tax 
schemes in agricultural districts. 



UNTAXING THE CONSUMER 65 

Equalizing Farm Values. 

By the selection of reasonably productive land 
the foregoing steps will make farms nearly equal 
in value, provided the maximum tax-free units are 
varied in size so as to aid in counter-balancing 
variations in quality of soil and difference in the 
availability of these farms to markets, etc. The 
tax-free area of each farm should likewise vary in 
size, according to the number of dependents sup- 
ported by the owner. 

MUST STOP SPECULATION. 

The State Land Settlement plan of California, 
together w^th affiliated State activities, if given a 
fair trial, will doubtless accomplish most of these 
objects and finally settle our perplexing land ques- 
tion, so far as it relates to agriculture, provided, 
speculation in the land coming under this plan is 
brought to an end relatively soon and methods 
are adopted to relieve the consumer from the in- 
direct payment of land taxes. 

By the terms of the California State Land 
Settlement law of 1917 the State purchases and 
subdivides under certain safeguards suitable land 
for a farm settlement, and develops the entire 
tract with roads, an irrigating system, model 
homes, etc. The State then sells farms to actual 
settlers at cost for a reasonably small payment 
down and small annual installments, with a low 
interest rate on deferred payments. It also pro- 
vides these settlers with such Farm Advisors as 
may be necessary. 

But until taxes on farm land (as well as on im- 
provements) are eliminated, the consumer will 
always have to pay them, however indirectly, and, 
unless a minimum use of the land be exacted by 



66 UNTAXING THE CONSUMER 

the State as a condition of continued ownership, 
and a proper basis be estabUshed for determining 
its maximum selhng price when resold by the 
owner, speculation cannot be reduced to the mini- 
mum and the work of the State Land Settlement 
Board will never result in the good it seeks to 
inaugurate. 

The price obtainable by any owner for land 
purchased by him under the state colonization 
scheme would have to be based on the original 
amount he paid for it to the State, plus the amount 
of taxes subsequently paid on the land towards 
public improvements, such as schools, roads, irri- 
gating systems, etc. Depreciation and obsolesence 
of these improvements (and deterioration of the 
land, if any) would have to be deducted so as to 
determine the allowable maximum selling price. 
The cost and present worth of private improve- 
ments on each farm would have to be recorded 
annually on the public records for purposes of in- 
come taxes or other reasons. Thus there would be 
a reliable appraisal of a farmer's entire real prop- 
erty; but within reasonable limits he would nat- 
urally be free to sell the private improvements at 
any price he could obtain. However, there would 
always be a record of their value and the public 
should have the right to acquire the property by 
merely adding to the recorded price the reasonable 
damage for losses to the owner's income on account 
of being thus disturbed. 

Fixing the Selling Price. 

Since it is possible that regular taxes will have 
to be levied on State Settlement Land until other 
lands are relieved or made relievable from tax- 
ation, and since it is impractical to bring this about 



UNTAXING THE CONSUMER 67 

until laws and rules establishing '^minimum use" 
for all land can be applied in practice, the assessor 
will have to tax these "settlement lands" annually 
for some time to come and, in doing so, he can 
without much special or additional work appraise 
them so as to show the ''maximum selling price" 
on the date of such assessment. In this appraise- 
ment work Rural Credit Banks may be of service. 
The maximum selling price, as already explained, 
must include the proportionate value of public 
improvements met by taxation on the land. If 
such limitations on selling prices turn out to be 
an illegal consideration for what the State accomp- 
plishes for the owner through these colonization 
schemes, they should be made legal. 

If the proposed plan were to be adopted, ade- 
quate laws that would bring about the following 
conditions (already noted in part on pages 39 
and 40), would be essential: 

1. A tax-free maximum limit in area of land 
for each individual owner. 

2. A minimum use to which every kind and 
class of land may be put as a condition of con- 
tinued ownership. This would have to be liberally 
construed at first; but, as land became relatively 
scarcer, the restrictions regarding use would have 
to be increased. 

3. A maximum price, based on cost, at which 
any parcel of "settlement land" may be resold by 
the owner. 

There is no good opportunity at hand to intro- 
duce such laws, except in connection with the 
State Land Settlement scheme. 

A Self Expanding Plan. 

This Settlement plan will tend to direct prac- 
tically all of the business of subdividing and selling 



68 UNTAXING THE CONSUMER 

farm lands to the State Land Settlement Board. 
If the land be freely sought by settlers, the State, 
to facilitate business after the scheme is well de- 
veloped, will probably organize County Boards as 
subsidiary organizations to the State Board. The 
present small private owners will farm their lands 
as heretofore and the large ones will hold their 
land until the State Board desires it for sub- 
division purposes and in the meantime will either 
leave it idle or farm it by grazing, grain growing, 
or in any of the other large ways. This will result 
in no injustice to any of the present land owners. 
Indeed, more people will be attracted to the state 
and the land will be subdivided earlier than would 
otherwise be the case, and the large landholder will 
on the average have an earlier opportunity to dis- 
pose of his land at a price the State thinks fair. 
The small farmers in common with the state will 
grow more prosperous, and business conditions 
generally will be better. There is hardly a doubt 
that self-interest will induce owners of large tracts 
aggregating millions of acres of good land to offer 
it voluntarily to the State Board at moderate 
prices; but should it not be thus offered, there are 
several ways, if any must be employed, to induce 
the owners to relinquish their holdings at satis- 
factory figures. Surtaxes on large tracts would 
suffice if no less arbitrary method were availing. 
Once a large area of land has come under the 
State Land Settlement plan, and once its sub- 
divided parcels have been given a definite, non- 
speculative, official selling price, it will become 
possible to gradually extend this price scheme by 
voluntary action of the owners to all other agri- 
cultural land. This would require decades to 
accomplish in its entirety; but, before a half million 
acres have been disposed of by the Board and have 



UNTAXING THE CONSUMER 69 

become fully producing, the problem of agricul- 
tural land in California may be considered solved. 
All the essential details for operating the plan will 
by that time be worked out and its momentum 
will carry it over the entire state. After this stage 
of the land problem has been reached one of several 
plans may be adopted by the State to acquire by 
purchase full ownership of farm land (exclusive 
of improvements). 

With definite, fixed, legal selling prices of land 
established, the State, when it is older and richer, 
might annually purchase a one percent or larger 
undivided interest in each parcel of land, without 
acquiring any proprietory rights in the operation 
of the land or any share in the profits. Thus the 
fixed selling price will be reduced so much each 
year between seller and purchaser. In time there 
would remain no selling price and long before that 
the Income Tax will probably have superceded all 
land taxes, as well as numerous other forms, except 
possibly a nominal tax to cover the administrative 
governmental work connected with land. 

After the State Settlement Board has accomp- 
plished enough to prove the plan an unquestioned 
success, the public will be ready for similar reforms 
in practically every branch of the great land ques- 
tion wherein the principle will undoubtedly be the 
same, though the details of bringing these about 
may differ for apparent and practical reasons. 

Once started rightly, the State Settlement Plan 
in California will be self-expanding at a geomet- 
rically increasing rate; because, on account of our 
favorable climate and continent-wide markets, we 
will draw farmers from the entire country and even 
from other parts of the world. 



70 UNTAXING THE CONSUMER 

Waste and Frugality. 

It is not necessary that a reform in our land 
laws during peace times should effect a great in- 
crease in food production per capita; for, as a 
whole, we have had nearly sufficient to eat. We 
cannot profitably consume more food than is 
wholesome for us, no matter what may be the 
demands of custom. But we can adopt a more 
extravagant mode of cooking and serving food, 
making much more food production necessary. 
However, in such case, we as a whole people shall 
have less inclination, less time and less means to 
live the higher life in Nature's playground or soli- 
tudes, in the universities, at social gatherings, in 
our home libraries, or at public lectures, or where- 
ever an individual can obtain culture and expand 
the soul. 

Still there is no narrow limit to the use of raw 
materials produced on a farm or ranch for indus- 
trial purposes, such as cotton, wool, silk, hemp, 
sisal, flax, oil, hides, and for the manufacture of 
industrial alcohol, potatoes and grain. Indeed, 
in the consumption of such agricultural products 
we can be very wasteful. For instance, we can all 
gradually acquire the custom of wearing a new 
suit of street clothes every week or month, instead 
of taking reasonable care of them and wearing 
them six months or longer. Wastefulness like this 
would have the same bad result on our intellectual 
development as extravagance in the use of food. 
But without wastefulness in manufactured prod- 
ucts their consumption may legitimately increase 
several fold when the great majority of workers 
receive remuneration that will enable them to 
supply their families comfortably with articles 



UNTAXING THE CONSmiER 71 

made of these products. (See foot-note) . At such 
a time naturally more farm land per capita will 
be required to supply the needs of the people, not- 
withstanding intensification in production. 

Number of Agriculturists Limited. 

In a country that is highly and sensibly devel- 
oped, the ratio of farmers should never be larger, 
as compared with the rest of the population, than 
that of the time required to produce the farm 
products of the country as compared with the 
entire time represented in producing tiie remainder 
of the nation's outputs. Assuming that the farmer 
and all other producers — industrial, commercial, 
professional, etc. — work an equal number of hours 
in an average day, these two ratios must be the 
same. 

However, into the problem enters the vexing 
and difficult question of how much intelligence 
and energy has been applied to the work done by 
each branch of the population. But the social 
intelligence fortunately is becoming stronger in 
social problems and by conscious and direct action 
it is at last beginning to weigh and regulate both 
the intelligence and energy applied to our great 
industries or activities. This will result in a great 
advance in our social program and also will make 
it more feasible to estimate the number of men 
necessary for employment in any of the industries. 

At present about half of the population of the 
United States is rural; but a large portion of this 
half is not employed on farms. Indeed, it is prob- 
ably safe to say that less than two thirds of our 
rural population — less than one-third of the people 
in our entire country — consists of farmers, farm 

Foot Note: — Here it it, of course, assumed that labor will jfirst pro- 
duce the increased quantity of materials and make them into useful articles. 



72 UNTAXING THE CONSUMER 

laborers and their families. Present indications 
are that this proportion will not increase, for the 
reason that our methods of production, as well as 
our wants, change as civilization grows, and we 
seem to require an increasing percentage of people 
to make the things that are produced elsewhere 
than on the farm. Unless, therefore, we return 
to the simpler life of the past as a whole nation, 
dispensing with many of the modern requirements 
and conveniences (including our increasing school 
facilities and the refining pleasures of music and 
art and what not), we shall probably never again 
have more than one-third of our population en- 
gaged in farming pursuits. In other words, we 
must recede toward primitive conditions if we 
adopt the *VBack to the Land" movement beyond 
actual requirements. Consequently, by solving 
the farm land and farm tax problems we shall 
leave extremely important parts of our tax and 
land questions still to be settled. 

This all refers to times of peace, of course. If 
the present war lasts much longer and we must 
feed half of Europe for an indefinite period, con- 
ditions must be quite different in these respects 
until after a world-wide economic equilibrium has 
been re-established. But for immediate war pur- 
poses large tracts of land can be utilized on an 
extensive scale under state supervision, if neces- 
sary, so far as men and equipment are available. 

Immeasurable Good. 

If farms are made more available and the con- 
ditions of farm life are greatly improved through 
state encouragement, those who are naturally in- 
clined toward farming will take up that occupa- 
tion. On the other hand, those engaged in it and 
who have other inclinations can sell out more 



UNTAXING THE CONSUMER 73 

easily, because the business and living conditions 
on farms will be more satisfactory. Thus farm- 
ing, the most important of all industries, will make 
great strides forward and fall more largely into 
and remain in native American hands, to the im- 
measurable good of our American manhood. As 
the consumer is relieved from taxation and the 
citizen is taxed according to his income, and priv- 
ilege is reduced to a minimum and monopoly made 
comparatively harmless — all through wise laws, 
good and enlightened citizenship and men specially 
trained in our public service — so will our social life 
advance and result in a better race of men, pro- 
vided the State aids in making agriculture second 
to no other occupation in desirability. 
, To reach the highest state of which society is 
capable, prices of some essential products must 
be regulated and others must be produced in in- 
dustries that are public-owned and operated, and 
all kinds of land must in the end be made practi- 
cally free of cost and free of all but nominal taxes. 
I feel, without any proof of its being true, that for 
the greatest good of our nation the land problem 
must be settled without avoidable injustice to 
present owners. 



FREE WATER. 

Free water is that which is owned by the public 
and is made available for both the public and the 
individual as usable water or as electric power; 
provided, however, that no charge is made for the 
water itself, all charges being limited to the cost 
of making it available for use. 

For water to be free it must be supplied to the 
consumer at actual cost or with only small profits 
accruing to the public itself; it must be supplied 
without the extra cost arising from taxation, or 
any other avoidable expense. 

The cost of water made available for use by 
private enterprise should and must cover a reason- 
able net profit; it must also include whatever taxes 
are assessed against the business, but it usually 
covers avoidable expenses of operation, and some- 
times an income or profit on over-capitalization. 
We can never obtain free water from private 
corporations. 

Only under public-ownership of water can such 
profit be eliminated or at least reduced very low, 
and the probability is that only under public- 
ownership can taxes on the water industry be 
wholly done away with. 

The price of free domestic and irrigating water 
should be suflScient to meet every necessary item 
of operating expense. Through properly charging 
off depreciation and obsolesence this expense in 
the course of time covers the cost of construction 
of the plant itself. 

It is readily seen that free water, delivered 
ready for use, does not mean water without cost 
to the consumer, but it does mean water at a price 
that covers neither profit, taxes nor unnecessary 



UNTAXING THE CONSUMER 75 

expenses, and above all it means no interest or 
profit charge on a capitalization of the water. 

In the same manner the price to the consumer 
of free hydro-electric current, or power, must 
cover like expenses of the power industry. 

The price paid for the free use of our navigable 
waters must similarly cover operation and main- 
tenance and ultimately include the cost of con- 
struction of canals, channels, harbors, locks and 
docks, and other engineering works which make 
the waters available for use. However, in the case 
of navigable waters this price is paid by the gen- 
eral public, except so far as tolls are charged, 
which must be met by the consumer. The latter, 
however, receives the benefit of the price that is 
not covered by tolls, provided that advantage 
afiForded to shipping by these engineering works 
is reflected in the shipping rates. 

According to the definition of free water, as 
herein given, the consumer has long had the use 
of free domestic and irrigating water, so far as it 
has been public-owned, and, as we know, it is so 
owned quite generally. We have free water for 
navigation and good laws in relation to it. Here- 
tofore, however, our privately owned railroads 
have to a very great extent manipulated the public 
out of using it, though this situation is bound to 
be corrected in a few years. 

There is comparatively little free water-power 
today, although the need for it is urgent. Why 
are we thus backward? The production of power 
is a comparatively new enterprise and the public 
is naturally conservative in extending its activities 
into new fields. This conservatism has been 
heightened by antagonistic interests who try to 
frighten communities into leaving the water-power 



76 UNTAXING THE CONSUMER 

business alone; but municipalities generally should 
make careful, extended investigations into the 
feasibility of entering into the power business, and 
in unfavorable cases learn how to make it feasible 
to engage in this branch of public service. 



SUCCESSFUL PUBLIC OWNERSHIP 
SIMPLIFIES TAXATION 

Foreword : 

The development of our invaluable water power 
resource, if left to private corporations under laws 
like those proposed thus far, will enlarge and deep- 
en our tax question. The vexatious problem of 
land taxation, whether the one now existing, or the 
one in prospect if we adopt Single Tax, will extend 
over and include our entire resource of water- 
power. 

Should what remains of this resource be devel- 
oped and held by private interests and be taxed 
under the Single Tax plan or any other, the con- 
sumer would have to pay the assessment, as well 
as a liberal profit and the very liberal running 
expenses of the corporations involved. Water 
power is especially adaptable to public ownership 
and operation, while, on the other hand, conditions 
affecting land make both public control and public 
ownership of land less simple than it would seem 
(as shown in the second chapter). 

It would therefore, be doubly wrong to grant 
ownership of water power to private interests for a 
term of fifty years, though this has been persist- 
ently urged by the upholders of the pending water 
power legislation. 

Were the public to develop and successfully 
operate this water power, the tax problem in re- 
gard to it would be eliminated. Under private 
ownership, however, the consumer must pay the 
present federal, state, county, city and other taxes, 
or, if Single Tax be adopted, he must pay an equiv- 
alent of such taxes on the power site. In either 



78 UNTAXING THE CONSUMER 

case let us say the combined assessments would 
be from three to four percent on the invested cap- 
ital. The consumer must also pay the regular 
profit — seven to ten percent — net on the capital 
employed. To this may be added at least two 
percent for deliberate extravagance in operating 
expenses. Here we have a probable total of from 
twelve to sixteen percent of the capital in the busi- 
ness applied to taxes, profits and superfluous ex- 
penses. In the case of public ownership and oper- 
tion the consumer, for the good of the community, 
ought to pay a service rate yielding a net profit of 
about four or five percent on the capital. Pro- 
vided it be efficiently conducted, this, as compared 
with private ownership of power, will give the con- 
sumer an advantage of seven to eleven percent, 
not speaking of greater benefits accruing to the 
general public. 

ENERGY, POWER, LEGISLATION* 

Mechanical energy (as distinguished from man 
and horse power), which in this article is consider- 
ed to be the power derived from coal, oil and 
waterfalls, probably furnishes nine-tenths or more 
of the power required in producing everything 
used by man, from artificially warmed air to the 
Panama Canal. 

Social Meaning of Mechanical Energy. 

If we should gradually lose all our knowledge 
gained since the time of Christ in respect to the 
development of mechanical energy, we should 
revert to the plane of civilization of His time. 
Stronger and keener intellects would use the weak- 
er for their man-power and direct it to their own 
advantage, the weaker finding judicious submis- 

FooT Note: — This article the writer prepared for the "Out West 
Magazine/' and it appeared in its number of April, 1917. 



UNTAXING THE CONSUMER 79 

sion the best attitude to take in the matter. This 
was the case in the advanced countries two thous- 
and years ago. On the other hand, if we reduce 
materially the cost to the public of this mechanical 
energy, increase the supply and multiply ways of 
using it, it ought to result on the part of the aver- 
age man in more time for self -improvement, and a 
great social advance would naturally follow. 

Materialistic Reasons for Developing 
Water Power. 

Hydro-electric power requires less human effort 
to produce than a corresponding amount of power 
derived from coal or oil. It is perpetual and its 
present use does not lessen the future supply, as 
is the case with coal and oil. It is, also, less ex- 
pensive. Again, every horsepower of hydro- 
electric energy used saves just so much coal or oil 
for the future. We should, therefore, develop and 
use our water-power as rapidly as practicable. 

Coal and oil have special uses. Their con- 
sumption for power, especially where hydro- 
electric energy is available, should be curtailed 
and they should be conserved as far as possible for 
these special uses, both for present and future 
generations. 

Prepare for Competition. 

After the war our manufacturers may have to 
be relieved of all avoidable handicaps in order to 
hold their own — even in home markets — against 
foreign low- waged competition. Since mechanical 
energy enters directly and indirectly into the cost 
of all manufactured products and is a very great 
item of expense in railway operation, constituting 
a large part of every important freight rate, it is 



80 UNTAXING THE CONSUMER 

to our interest that it be furnished to all users at 
the lowest reasonable price. If this relief is not 
given to our makers and transporters of goods, the 
consumer will necessarily have to meet the extra 
cost, and probably many articles that should be 
made here will be manufactured in foreign lands 
under lower wage conditions, and, being sold here, 
will weaken our industrial structure. Even if such 
goods were barred from entry by high tariffs, some 
weakening would take place. 

Public Ownership Necessary. 

Before the present generation has passed nearly 
all the energy required to run our factories and 
railroads and nearly all of the current for lighting 
our streets and buildings should come from our 
streams. 

To furnish electric energy without material net 
profit beyond what is necessary to cover sinking 
fund and interest, and only a small net profit after 
bonds are once paid off, it is necessary for the 
public itself to own and operate our great electric 
plants. The intrinsic value of our undeveloped 
water power is far greater than that of all the oil 
and coal still to be extracted from the soil of the 
United States, even if the former were tanked 
ready for shipment and the latter were in bins 
ready for loading onto the cars. There is a con- 
tinuous and perpetual supply of water power on 
the earth's surface and it needs only the generat- 
ing plant to produce current and the distributing 
system to deliver it at its destination. 

A Great Donation. 

The inclination of our government, judging by 
the legislation recommended in 1916, seems to be 
to place this invaluable asset, this vital national 



UNTAXING THE CONSUMER 81 

resource, into private hands under conditions 
equivalent almost to absolute private ownership, 
to be operated first and foremost for private profit. 
To be sure, the proposed law provides for "recap- 
ture" by the public in fifty years and for public 
regulation in the meantime; but these provisions 
are worded in most general terms, really strength- 
ening private owners in their possession. They 
seem to have been worded by corporation lawyers, 
and, when it is said that the proposed water power 
laws grant unrestricted private ownership, it is the 
practical truth. (See foot-note.) 

What Ought We to Have? 

Any government oflScial who favors laws which 
are hostile or detrimental to the introduction of 
public ownership of power, even at the end of 
fifty years, doubtlessly believes the public incom- 
petent to learn to serve itself with this natural 
resource. 

Is the pubUc thus incompetent and bound to 
remain so? I do not beUeve it. Should such laws 
be tolerated by our present-day Americans .f^ If 
not, what should be done? We should make laws 
favoring the transition of water power from private 

Foot Note: — In the spring of 1917, when the above was written, the 
friends of public ownership of water power were working hard against the 
Shields' and similar bills, in the interest of better power laws, and they 
have been alert ever since. However, the results of their eflForts are for the 
most part still unknown. 

Under date of August 20, 1918, an Associated Press dispatch was pub- 
lished as follows: — 

(By Associated Press.) 

Washinqton, Aug. 20. — "Debate began in the House today on the 
administration water power bill providing a leasing system for development 
of power projects on navigable streams. Representative Ferris of Okla- 
homa, chairman of the public lands committee and a member of the joint 
committee on water power, led a fight for modification of the so-called "re- 
capture clause" so as to give the Federal Government or any municipality 
the right to take over plants by paying the actual cost of the development. ' 

If Mr. Ferris succeeds in this fight, a great step will be taken in advance 
of the position assumed in 1916 by a large majority of our national legislators. 



82 UNTAXING THE CONSUMER 

to public ownership; we should frame a definitely 
outlined set of principles covering the regulation 
of rates charged by private corporations in the 
meantime. Recapture clauses should provide for 
purchase at any time by cities, counties, states, or 
our federal government, at prices determined 
under specifically described general terms ap- 
proved by public-spirited experts and patriotic 
men familiar in detail with large public-owned 
and private owned industrial enterprises; in 
cases of purchase of electric plants by the public, 
these clauses should provide adequate compensa- 
tion for private initiative, enterprise and risk. 
The laws should demand scientifically correct 
plans and substantial construction — ^subject to 
government approval. 

Water Works as an Example. 

We now have publicly owned municipal water 
works in all our important cities. To such an 
extent has public ownership of water works proved 
an advance over private ownership that it is diflS- 
cult to imagine the impression that would be 
created today by a large city permitting itself to 
be supplied by private works. Cities that have 
engaged in the manufacture of electric current 
have found to their surprise that with experienced 
men at the head, this business is no more difficult 
than municipal water works to operate; in fact, 
the commercial departments of both these activi- 
ties are very similar. 

LEGISLATION OF WATER POWER 

The following points should be weighed by our 
legislators in making our water power laws: 
1. They should consider whether public regu- 



UNTAXING THE CONSUMER 83 

lation of privately owned public utility corpora- 
tions is practicable as a permanent plan. 

2. They should bear in mind the fact that 
public ownership of electric power is in reality the 
first natural step towards public ownership or 
absolute control of railway transportation. 

3. Next to the water business our power busi- 
ness is the one that seems best adapted to public 
operation, but we shall never be granted good 
legislation unless our legislators fully realize the 
profound importance of hydro-electric energy to 
the social and intellectual, as well as the industrial, 
progress of our country. This statement will mean 
little, unless we clearly comprehend the awful 
results that would follow our falling behind Eu- 
rope and Japan in social and intellectual progress. 
Since this progress depends on industrial advance- 
ment, which in turn is founded principally on 
mechanical force, our social, intellectual and even 
spiritual strength is related directly and closely to 
mechanical force, and only less directly to water 
power legislation. 

Here we see a problem which, if badly handled, 
will retard social and intellectual progress. Inferi- 
ority will be our lot if other nations treat this and 
kindred problems better than we, and foreign 
domination, whether open or sugar-coated, recog- 
nized or not, will be the outcome. In time, such 
domination will irritate us and war will result, 
with probable disaster for us. (See foot-note.) 

4. Our legislators should take into account the 
practicability of public ownership of our electric 

Foot Note: — Our present military success (August, 1918), makes this 
and the preceding paragraph seem over-drawn. Yet, as long as the nation 
is unable or unwilling to keep and successfully operate its own water power 
in times of peace, it indicates a present existence of inferiority in social 
advancement. This in itself shows that we are in constant danger of being 
oat-stripped. 



84 UNTAXING THE CONSUMER 

power business and should provide means to make 
its success more certain. Hydro-electric courses, 
fostered by the Government in our State Univer- 
sities, would promote this end. 

5. They should bear in mind the fact that, as 
population becomes more dense and society more 
complex, no country can hold its own intellectual- 
ly and spiritually against the onward tread of 
civilization, unless industrial effort is conducted 
with a corresponding growth of efficiency, one 
requisite of which is low-priced mechanical energy. 

6. They should weigh deeply the increased 
risk to our economic welfare of the tampering with 
politics and the debauching of our local adminis- 
trations occasioned often without premeditated 
design by nearly every private utility corporation 
added to a community. 

7. They should note that it is to the interest 
of private power corporations to keep the public 
from engaging in the power business for two main 
reasons: FirsU through an extension of the public 
ownership of power the rapid numerical increase 
of private power corporations would be checked 
and they would therefore not have so great a 
number of employees and stockholders to back the 
efforts of hired expert persuaders, whose meddling 
with legislation has heretofore given us laws in- 
consistent with the best public policy. Second, 
after engaging in this enterprise more generally, 
the public would learn the truth about the cost of 
manufacture and distribution of current and 
would, therefore, be in position to regulate the 
private corporations more strictly, more intelli- 
gently and more justly. 

8. Our legislators should appreciate the fact 
that, as men are constituted, it is practically im- 



UNTAXING THE CONSUMER 85 

possible for any group of individuals carrying on 
a private power business to frame a power bill that 
will be fair to the public; that few men are avail- 
able who are trained to frame such a bill as will 
adequately safeguard our public interests; that an 
adviser who does not insist upon the public's being 
protected fully is neither safe nor far-seeing and 
should not be followed. 

9. Since electrical power is taking the lead as 
a driving force in industry, including transporta- 
tion, and since the cost of power for driving ma- 
chinery is one of the important elements in in- 
dustry, it becomes extremely important that 
electrical power be furnished to industrial enter- 
prises and to the public generally with strict im- 
partiality and at the lowest practicable cost. 
Government operation of the power business will 
soon be of more consequence to the people than 
Government operation of our postoffices. 

10. If impartial service at the minimum feas- 
ible price is not given the public, advancement in 
industrial efl&ciency will be retarded and the con- 
sequences will, of course, have to be borne by the 
public. This would not be so serious a matter if 
improvement in industrial justice did not depend 
largely upon a better industrial efficiency and if 
advance in spiritual development did not in turn 
rest largely upon them both. 

11. Our legislators should consider that, prac- 
tically as well as theoretically, public ownership 
of our most important utilities would stabilize and 
strengthen the country economically, and that 
under present conditions the next best steps in 
this direction are to obtain good water legislation 
and to inaugurate public ownership and operation 
of power. It is true that a fair quality of public 



86 UNTAXING THE CONSUMER 

character is required to conduct successfully public 
ownership enterprises; but this character needs for 
its development actual experience. 

12. Many details necessary for any good pow- 
er bill can be supplied only by men who have had 
experience in the actual operation of public power 
plants and who have experienced and mastered 
the opposition of private power interests. With- 
out the assistance of men possessed of such exper- 
ience, combined with that acquired in regulating 
the rates of private power corporations, the best 
lawyers or legislators must fail in framing a power 
bill that is fair to the public. There are only three 
men on the Pacific Coast that I know of who are 
well qualified by experience in both theory and 
practice to give this information. There must be 
proportionally few in other parts of the country. 

13. Our legislators should not overlook the 
fact that the rate of industrial development has 
advanced so rapidly in late years that a lease for 
the next half century of any natural resource would 
be equivalent from a business standpoint to one 
covering a very much longer period in the recent 
past. 

14. They should be aware that the people's 
attention is being centered on improvement in our 
public service. Our universities are becoming 
deeply interested in the subject, and this is des- 
tined in hardly more than a decade to result in 
a supply of efficient public servants for all kinds 
of service, even in public utilities. Our electric 
power will doubtless be the first to receive the 
serious attention of these institutions. 

15. They should fully realize that our most 
valuable and powerful national asset is the young 
people who stand ready to train themselves to fill 



UNTAXING THE CONSUMER 87 

honorable positions oflFered by the pubHc and that, 
if we safeguard our great undeveloped natural re- 
sources — such as power — and through the medium 
of our institutions of learning give these young 
citizens the necessary practical and theoretical 
training to manage these resources for us, we shall 
be on the scientific road of true progress. 

16. Our legislators should always take into 
account the fact that large private interests of 
every sort naturally co-operate in their efforts to 
obtain favorable legislation, and that they have 
the finances to hire the best legal talent; that 
private interests rarely, if ever, work for legisla- 
tion that safeguards public interest as against 
their own. 

For nine years I have closely watched the strug- 
gle between the public and private electric power 
interests of Southern California, a struggle typical 
of similar controversies elsewhere; as a result of 
these observations, I have lost most of the faith 
I had in public regulation of private corporations, 
as compared with public ownership — provided 
there are available trained men of character to 
manage the pubUc power plants, as has thus far 
been the case on the Pacific Coast. Under these 
conditions public ownership is vastly superior to 
regulated private ownership of electrical power. 



CONNECTION OF OUR UNIVERSITIES 

WITH THE WATER POWER 

PROBLEM.* 

One of the most important economic questions 
now before the people of this country, is the pro- 
per development and ownership of their unappro- 
priated water power. The undesirable Shields' 
Water Power Bill, which passed the Senate on 
March 8, 1916, should be defeated in the House. 
(See foot-note). It is directly opposed to the 
pubUc interest, although a superficial reading 
might lead to the belief that it was meant to 
protect the public. The bill provides for leasing 
water power sites in our navigable streams to pri- 
vate corporations for periods of fifty years; but it 
does not stipulate that with reasonable safeguards 
to protect private investment the public may take 
over the power business whenever it is prepared 
to do so. Furthermore, the conditions provided 
in the bill for the recapture of power by the 
public at the expiration of the fifty-year term 
are utterly against the interests of the people. 

Foot Note: — This article first appeared in the "Out West Magazine" 
of April, 1916, preceded by the following editorial note: — 

"With numerous schools operated in our larger cities, financed by the 
great corporations of the country, which seize upon promising young men. 
mould and shape them at no little expense into able subalterns with the 
prospect of becoming leaders, Mr. Thum's suggestion that hydro-electric 
plants be added to the equipment of our state universities is peculiarly 
pertinent. It is inconceivable that the Public should handicap itself with 
inefficient employes, yet efficiency comes only with training. As presently 
constituted, training in the operation or manufacturing branch of Big Busi- 
ness can be secured only in the ranks of the great corporations where the 
student becomes impregnated with the ideals (?) of private ownership ^of 
public utilities. Public ownership of electrical energy is inevitable despite 
attempts by private interests to construct fifty-year obstructions, such as 
are typified by the Shields' Water Power Bill." 

Foot Note: — As is known by all who took an interest in the matter, 
the House refused to pass the Shields* bill in the form accepted by the 
Senate and the entire water power question was postponed. But, this 
question is now (August, 1918), again under consideration by Congress, and 
the reactionary interests that were behind the Shields' Bill are doubtless in 
better fighting trim than heretofore and should be closely watched. 



UNTAXING THE CONSUMER 89 

The passing of such a bill can seem feasible only 
to those who do not realize how great are the hard- 
ships which its bad points would impose upon the 
public; it would seem advisable only to those who 
fail to appreciate: first, the ineradicable difficulties 
inherent to supervision of privately owned public 
utilities by the government; second, the ease with 
which the public itself can operate an electric 
power business when certain conditions exist that 
can be easily created and maintained; third, and 
what is most important, the fact that every earn- 
est effort made by the community to maintain 
honest and efficient operation of its utilities ele- 
vates public spirit, strengthens public self-confi- 
dence, advances public morals, deepens public 
business intelligence and promotes public peace 
and contentment. 

The Public owns this undeveloped and unap- 
propriated water power; yet it is letting it all pass 
into the hands of private appropriators. With the 
exception of Los Angeles, Tacoma, Marquette, 
Seattle and Holyoke, no cities of the United States 
seem to have acquired water power in any con- 
siderable amount for the public benefit. 

In this nation are many universities capable of 
thoroughly training young men to operate hydro- 
electric plants, provided they had as part of their 
equipment a model plant rendering commercial 
service in a large way. Most states, and especially 
those of the Pacific Coast, can justly boast of 
possessing a sufficient number of capable young 
men of the highest character, who, in order to 
serve their cities, are ready and eager to take up 
a combined practical and theoretical electro- 
engineering course at any of the Universities as 
soon as and wherever such a coml^ned course is 



90 UNTAXING THE CONSUMER 

offered: young men of such calibre that they 
would probably render a service far surpassing 
that usually given in privately owned hydro- 
electric plants in this country. 

All but the managerial positions in these works 
could be filled with the best students who are 
taking an electrical engineering course and who 
are earning their way through college. They 
might be given employment at the works for a 
sufficient period to save out of their wages approx- 
imately enough to pay their expenses at college 
for a full semester, and return to the works again 
to earn the expense for another semester the fol- 
lowing year, continuing in this way until the 
entire college course is completed. Naturally it 
would be so arranged that all instructive features 
of the work at the plant would re-enforce the 
theoretical training at college, just as they are 
now doing under the "Co-operative Plan" intro- 
duced and employed with increasing success by 
the University of Cincinnati. Where nearby sites 
are not available these power plants could be 
many miles from their respective universities with- 
out causing inconvenience. 

Now, has the United States the right man or 
set of men to initiate the necessary laws for en- 
abling our State Universities to add to their re- 
spective equipments a hydro-electric plant of, say, 
50,000 or 100,000 horse power each for the purpose 
of: first, giving their electrical engineering students 
the best possible training for the operation of pub- 
licly or privately owned power plants; second^ ex- 
hibiting at all times a model up-to-date demon- 
onstrating plant, for the benefit educationally of 
communities intending to engage in their own 
power business; third, learning by experience all 



UNTAXING THE CONSUMER 91 

the facts necessary to regulate the business of 
privately owned power plants as justly as possible; 
fourth, supplying current to the surrounding ter- 
ritory? If such men are among us, as undoubtedly 
they are, there is nothing lacking but the start. 
When will it be made? 

To carry out this plan to its conclusion — public 
ownership — no private power interest need be 
treated unfairly. Our public plants, where they 
come into competition with private plants, could 
serve at prices that would leave a fair margin to 
the private corporations, and the profits accruing 
to the public plants could be used to apply on 
their extensions or on the gradual purchase of the 
private plants. Serious competition between pub- 
lic and private plants would not be necessary, 
since the demand for electric current will always 
exceed what the hydro-electric plants can furnish. 
The public would not be hurt much by selling to 
itself at a profit until it has full control of the 
field; for, if it continue its present slow methods 
of extending public ownership of the electric 
power business and does not adopt a general policy 
for promoting public ownership in some well 
ordered manner that involves the most thorough 
development of specialists and the inauguration 
of the most eflScient business system for operating 
the plants, progress in this line will be seriously 
retarded, making such service as a whole cost 
much more than it would under the plan above 
suggested. 

If we, the Public, have in the past depended 
upon private enterprise to supply us with electric 
current, because we have been too gullible, in- 
competent, indifferent, or corruptible to operate 
our own electric power plants heretofore, we ought 



92 ll:^TAXING THE CONSUMER 

now, if we enter this business, to protect fairly all 
private owners that are inclined to be reasonable, 
until we can take over their plants on a just basis. 
The importance to our country of public owner- 
ship of electric energy is so great that private 
owners will eventually have to yield to the inevit- 
able change from private to public operation of 
this utility. Then why should not we, the Public, 
prepare to enter this field intelligently and express 
our strenuous opposition to the proposed law 
above mentioned, until it is amended so as to 
provide adequately for the acquisition by munici- 
palities of private power plants on fair terms at 
any time during the life of the fifty-year lease 
contemplated by the Government, and also for 
the establishment by each state of a large com- 
mercial plant for operation by its own universities? 



AUTHOR'S NOTE 

When land (and this, of course, includes water) 
has been made actually free and prices of essen- 
tail commodities are regulated by public author- 
ity, and successful public ownership of important 
public utilities is extended and taxes are wisely 
levied on private incomes, then only will the con- 
sumer be untaxed and our great tax problem 
solved. 



93 



94 APPENDIX 

APPENDIX I. 

The following statement is a supplement to 
the introduction: 

In this book when speaking of the Single Tax 
theory, I consider the subject as it was published 
by Henry George in 1879 and promulgated by 
his followers until after 1911. In that year I 
attended a lecture on Single Tax given by 
Joseph Eels and Daniel Keifer who were the two 
principal advocates of this system, and they were 
still adhering to Mr. George's plan fully. 

During this period, thought on Single Tax re- 
mained stationary but some time after this Single 
Taxers began to think more seriously upon the 
matter. They divided spontaneously into groups, 
some holding to the original theory strictly, 
others accepting modifications of it. The com- 
parative recentness of this thought activity only 
indicates that the whole theory needs further 
serious consideration 



APPENDIX II. 

Referring to the second paragraph under the 
heading "Avoiding High Land Taxes", (pages 
20 and 21), it is not as clearly expressed as it 
should be. What follows is a revised form. 

I can readily see that this move of the trusts 
to reduce the land tax to a minimum could be 
frustrated by our public authorities. If given 
the power, they could arbitrarily increase the 
tax and thus compel a rise in the prices de- 
manded by these raw material corporations. To 
prevent the rise from being entirely shifted onto 
the consumer, however, the taxes would have to 



APPENDIX 95 

be increased to such an extent as to necessitate an 
increase in prices beyond his purse, if the original 
amount of profit were to be covered. In this in- 
stance the consumer could not do more than to 
meet the burden of the advance up to the limit 
of what "the traffic will bear' ' . The only remedy 
for such a condition would be to lower taxes and 
to make government price regulation so thorough 
as to require administrative machinery which 
would suffice for the public operation of the 
trusts themselves. 



APPENDIX III. 

The following should have appeared on page 
67 as indicated. 

Capital Investment in and upon Land. 

Capital Investment in any parcel of land, as 
distinguished from capital investment upon it is 
a sum equal to such part of the taxes as have 
from time to time been paid on the parcel for 
public improvements not located upon it, and 
otherwise for creating conditions necessary or 
desirable for the social life of the community. 
For immediate purposes capital investment in 
land does not include money that may have been 
paid for its location. 

Capital investment upon land is the money 
value of the improvements located within its 
boundries, such as buildings, wells, drains, sewers, 
fruit trees, crops, etc. If interest charges are an 
allowable part of the capital investment in land, 
such questions as the following arise : 

First: In which case may interest be charged? 

Second : How is the interest rate to be deter- 
mined? 



96 APPENDIX 

Third: During what period of time shall in- 
terest be allowed? 

Fourth: Shall any rent received in excess of 
a legally permitted income be deducted from the 
capital invested in land? 

Unearned Increments, a Revised Definition. 

In case of sale or reappraisal of land, the un- 
earned price-increment is the amount received or 
appraised in excess of the capital invested in the 
property, no account being taken of any addi- 
tional price paid for location. Now, if calcula- 
tions determining the amount of this investment 
are made on the same lines as those covering any 
other kind of investment, it will be found that in 
a vast number of cases there is no unearned 
increment, but a decrement. 

The unearned land-rent-increment is the net 
amount of rent received in excess of a legally 
allowed rate of income on the capital invested in 
the land, additional capital paid for location again 
being disregarded. 

Rent Survey Desirable. 

It is quite possible that the total of all land- 
rent paid in the United States is but a fair return 
on the aggregate capital investment in all its 
land. Now, if this total amount of such land-rent 
could be and were equitably distributed between 
all property owners, it would finally reach the 
consumer in as just proportions as is possible 
under our present economic system. No injus- 
tice would then be done to the people; for it is 
their duty as consumers to bear rents on these 
improvements, if just in amount and fairly dis- 
tributed, as a part of the legitimate cost of the 



APPENDIX 97 

materials and services they purchase. But, on 
account of the uncertainties in the real estate 
business rents are not and cannot as a rule be 
equitably distributed. 

It seems that no accurate and comprehensive 
survey has ever been made of the rent conditions 
in the United States to determine in what respect 
and in what degree these rents are unfair. Yet 
equity is the basic principal of true progress. 



